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Business deals

The hunt is on for Hokkaido's main airport

New Chitose is Japan's second most profitable gateway but comes with six catches

Hokkaido's New Chitose Airport is the only profitable one of the seven airfields on Japan's northernmost main island.

TOKYO -- The four consortia that have tendered initial bids for the right to operate seven airports in Hokkaido have their eye on one jewel in particular -- New Chitose Airport.

Hokkaido's main international airport is Japan's second most profitable gateway, after Tokyo's Haneda Airport.

Also included in the package concession are the rights to six unprofitable Hokkaido airports.

Bidding closed on Aug. 16. The central and local governments will now negotiate with the four groups before deciding on its preferred bidder. That decision will come next summer, perhaps in July. The winning bid is expected to come in in excess of 150 billion yen ($1.36 billion).

The airports are to be privatized after May 2020.

One consortium includes Tokyo real estate developer Mitsubishi Estate and a Hokkaido company. Another comprises a French company and Japan's Orix.

During Japan's traditional Bon summer holiday season, in mid-August, New Chitose was crowded with families and tourists. As passengers, luggage in tow, formed lines at customs, English, Chinese and Korean could be heard.

Hokkaido has a number of summertime tourist draws, like the lavender fields in the Furano region. In winter, the ski resorts near Niseko entice droves of foreign tourists.

Passenger traffic through New Chitose's international terminal increased to about 3.2 million in 2017, tripling from five years earlier.

The consortium that includes Mitsubishi Estate is led by Hokkaido Airport Terminal, which operates the New Chitose terminal building. It comprises about 20 companies, including Mitsui Fudosan and Tokyu.

For another bid, French airport operator Vinci Airports joined hands with Orix, a Tokyo leasing company. Vinci operates 35 airports globally. It is also part-operator of three airports in Japan's Kansai region, surrounding Osaka, Nara and Kyoto.

Another candidate group includes Aeroports de Paris, Tokyo's Tobu Railway and tourism company Kamori Kanko, headquartered in the Hokkaido capital of Sapporo.

Passengers mill about in the international terminal of New Chitose Airport, which is seeing a surge in foreign tourist traffic.

At Kansai Airport, which Vinci and Orix have jointly operated since 2016, a passageway leading to the boarding gate is lined with duty-free shops selling everything from home appliances to confectioneries. No walls separate the shops, allowing visitors to meander through and browse a wide range of items.

The height of shelves is kept low so shoppers' eyes are able to take in an array of goods.

Vinci introduced the layout. Total duty-free sales grew 50% in the year ended this past March.

"We are now becoming like a real private-sector company," said Yoshiyuki Yamaya, the president of Kansai Airports, which operates the airport. "We still have some way to go, but we will proceed in that direction."

For Japan's railway and real estate companies, which rely on domestic demand, airport operations is one of the few sectors in which they can grow -- a potential that is driven by Japan's heavy inbound tourist traffic.

"We expect to take advantage of the customer-attracting skills we have gained by operating commercial complexes and office buildings," said Yasuyuki Sakaguchi, general manager of the airport business department at Mitsubishi Estate.

The concession is to run the seven airports -- including those in Hakodate, Memanbetsu and Asahikawa -- for 30 years. But New Chitose was the carrot used to attract bidders, who might be able to lean on their private sector expertise to rescue the six money losers.

Success in Hokkaido will depend on the new operator's balancing skills. The winning bidder will have to attract visitors to deficit-ridden airports and secure local transportation links, and not focus solely on boosting overall profit.

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