A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program

João Carlos Félix Souza; Matheus Martins Silva; Luiza Moury Fernandes; Guilherme Nóbrega; Felipe Moutinho

doi:doi:10.11648/j.ajtab.20190503.11

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A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program

João Carlos Félix Souza, Matheus Martins Silva, Luiza Moury Fernandes, Guilherme Nóbrega, Felipe Moutinho

Published in American Journal of Theoretical and Applied Business (Volume 5, Issue 3)

Received: 6 August 2019 Accepted: 3 September 2019 Published: 24 September 2019

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Abstract

The Brazilian government began, in 2012, the program of concessions of the administration of Brazilian airports in order to improve customer service through private capital. One of the main subjects of this concession plan was the airport of Guarulhos, in the state of São Paulo (Brazil), which is the largest airport in the country, responsible on average for over 20,000 flights and transporting approximately 4 million passengers per month. Concessions of this scale demand large investments, which in turn can result in greater uncertainties regarding future cash flows. In certain cases, the NPV (Net Present Value) of these investments may become negative, which does not necessarily mean that the undertaking is unfeasible, or that it should not be encouraged. Changes in the overall economic scenario can subsequently lead to updated results in the expected cash flow, making the investment viable. One of the ways to evaluate a project under an uncertain scenario is to use the Real Options model as a strategic complement to cash flow analysis. This article presents an application to calculate the value of the expansion option for the Guarulhos international airport. For the models of uncertainty related to passenger load and flight volume, the value of the expansion option using the Black-Scholes-Merton model is calculated. The article concludes with the recommendation for the expansion to be carried out on a 4-year horizon, which in this period results in a positive strategic NPV, in addition to optimizing the utilization of the airport’s terminal capacity.

Published in	American Journal of Theoretical and Applied Business (Volume 5, Issue 3)
DOI	10.11648/j.ajtab.20190503.11
Page(s)	47-52
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2019. Published by Science Publishing Group

Keywords

Airports, Concessions, NPV, Real Options, Black-Scholes-Merton Model

References

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[2]	Copeland, T. and V. Antikarov, "Opções reais: um novo paradigma para reinventar a avaliação de investimentos". Rio de Janeiro, Editora Campus, 2001.
[3]	Adetunji, O. M. and A. A. Owolabi, "Real Options and Government Supports to Infrastrucutre Investments: An Empirical Study. Journal of Modern Accounting and Auditing", v. 13, n. 5, p. 196-215. DOI: 10.17265/1548-6583/2017.05.002, 2017.
[4]	Taneja, P., M. E. Aartsen, J. A. Annema, M. van Schuylenburg, "Real Options for Port Infrastructure Invesments. Shenzhen, China. Infrastructure Systems and Services: Next Generation Infrastructure Systems for Eco-Cities (INFRA)", 2010 Third International Conference – Shenzhen/ China, 2010.
[5]	IPEA, “IPEA divulga estudos sobre aeroportos no Brasil – Nota técnica do Instituto trata de estratégias e investimentos no setor aeroportuário no Brasil” Available in: (https://www.ipea.gov.br/portal/index.php?option=com_content&view=article&id=8032&Itemid=8). Acessed in: march 5, 2019.
[6]	Paiva, Izabela Davanzo, "Concessão de aeroportos no Brasil: A transferência da Gestão do Aeroporto de Confins para a Iniciativa Privada". Rem: Universidade Federal de Alfenas, 2015.
[7]	ANAC, "Anuário do Transporte Aéreo 2017". Rem: Site Anac. 2018.
[8]	Poole Jr., R. W, "Transportation Infrastructure Finance 2012". Reason Foundation, April 8, 2013.
[9]	Moreira, V. R., "Gestão dos Riscos do Agronegócio no Contexto Cooperativista". 208 f. Tese (Doutorado em Administração de Empresas) – Fundação Getúlio Vargas, São Paulo, 2009.
[10]	Black, F. and M. Scholes (1973), "The pricing of options and corporate liabilities". Journal of Political Economy, v. 81, p. 637-659.
[11]	Silva, E. L. da; Menezes, E. M., "Metodologia da Pesquisa e Elaboração de Dissertação". 4 ed. Florianópolis: Editora UFSC, 2005.
[12]	ANUÁRIO CNT DO TRANSPORTE, "Passageiros-Quilômetro pagos transportados". Available at: (http://anuariodotransporte.cnt.org.br/2018/Aeroviario/4-5-2-1-/Passageiros-Quil%C3%B4metro-pagos-transportados-(RPK)). Acessed in: June 10, 2019.
[13]	Pindyck, R. (1991), "Irreversibility, Uncertainty, and Investment". Journal of Economic Literature, v. 29, n. 3, p. 110-1148.
[14]	Dixit, A. and R. Pindyck (1994), "Investment under uncertainty". New Jersey, USA: Princeton University Press.
[15]	Lima, Gabriel A.C.; Suslick, Saul B, "Estimativa da volatilidade de projetos de bens minerais". Rem: Revista Escola de Minas, v. 59, n. 1, p. 37-46, 2006.
[16]	Souza, J. C. F.; Rocha, C. H.; Souza, J. G. M., "Modelo de Opções Reais para avaliação de investimentos em novos portos e terminais portuários brasileiros". Transportes (Rio de Janeiro - Brasil), vol. 26, série 4, p. 103-115, 2018.
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APA Style

João Carlos Félix Souza, Matheus Martins Silva, Luiza Moury Fernandes, Guilherme Nóbrega, Felipe Moutinho. (2019). A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program. American Journal of Theoretical and Applied Business, 5(3), 47-52. https://doi.org/10.11648/j.ajtab.20190503.11

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ACS Style

João Carlos Félix Souza; Matheus Martins Silva; Luiza Moury Fernandes; Guilherme Nóbrega; Felipe Moutinho. A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program. Am. J. Theor. Appl. Bus. 2019, 5(3), 47-52. doi: 10.11648/j.ajtab.20190503.11

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AMA Style

João Carlos Félix Souza, Matheus Martins Silva, Luiza Moury Fernandes, Guilherme Nóbrega, Felipe Moutinho. A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program. Am J Theor Appl Bus. 2019;5(3):47-52. doi: 10.11648/j.ajtab.20190503.11

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@article{10.11648/j.ajtab.20190503.11,
  author = {João Carlos Félix Souza and Matheus Martins Silva and Luiza Moury Fernandes and Guilherme Nóbrega and Felipe Moutinho},
  title = {A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program},
  journal = {American Journal of Theoretical and Applied Business},
  volume = {5},
  number = {3},
  pages = {47-52},
  doi = {10.11648/j.ajtab.20190503.11},
  url = {https://doi.org/10.11648/j.ajtab.20190503.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajtab.20190503.11},
  abstract = {The Brazilian government began, in 2012, the program of concessions of the administration of Brazilian airports in order to improve customer service through private capital. One of the main subjects of this concession plan was the airport of Guarulhos, in the state of São Paulo (Brazil), which is the largest airport in the country, responsible on average for over 20,000 flights and transporting approximately 4 million passengers per month. Concessions of this scale demand large investments, which in turn can result in greater uncertainties regarding future cash flows. In certain cases, the NPV (Net Present Value) of these investments may become negative, which does not necessarily mean that the undertaking is unfeasible, or that it should not be encouraged. Changes in the overall economic scenario can subsequently lead to updated results in the expected cash flow, making the investment viable. One of the ways to evaluate a project under an uncertain scenario is to use the Real Options model as a strategic complement to cash flow analysis. This article presents an application to calculate the value of the expansion option for the Guarulhos international airport. For the models of uncertainty related to passenger load and flight volume, the value of the expansion option using the Black-Scholes-Merton model is calculated. The article concludes with the recommendation for the expansion to be carried out on a 4-year horizon, which in this period results in a positive strategic NPV, in addition to optimizing the utilization of the airport’s terminal capacity.},
 year = {2019}
}

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TY  - JOUR
T1  - A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program
AU  - João Carlos Félix Souza
AU  - Matheus Martins Silva
AU  - Luiza Moury Fernandes
AU  - Guilherme Nóbrega
AU  - Felipe Moutinho
Y1  - 2019/09/24
PY  - 2019
N1  - https://doi.org/10.11648/j.ajtab.20190503.11
DO  - 10.11648/j.ajtab.20190503.11
T2  - American Journal of Theoretical and Applied Business
JF  - American Journal of Theoretical and Applied Business
JO  - American Journal of Theoretical and Applied Business
SP  - 47
EP  - 52
PB  - Science Publishing Group
SN  - 2469-7842
UR  - https://doi.org/10.11648/j.ajtab.20190503.11
AB  - The Brazilian government began, in 2012, the program of concessions of the administration of Brazilian airports in order to improve customer service through private capital. One of the main subjects of this concession plan was the airport of Guarulhos, in the state of São Paulo (Brazil), which is the largest airport in the country, responsible on average for over 20,000 flights and transporting approximately 4 million passengers per month. Concessions of this scale demand large investments, which in turn can result in greater uncertainties regarding future cash flows. In certain cases, the NPV (Net Present Value) of these investments may become negative, which does not necessarily mean that the undertaking is unfeasible, or that it should not be encouraged. Changes in the overall economic scenario can subsequently lead to updated results in the expected cash flow, making the investment viable. One of the ways to evaluate a project under an uncertain scenario is to use the Real Options model as a strategic complement to cash flow analysis. This article presents an application to calculate the value of the expansion option for the Guarulhos international airport. For the models of uncertainty related to passenger load and flight volume, the value of the expansion option using the Black-Scholes-Merton model is calculated. The article concludes with the recommendation for the expansion to be carried out on a 4-year horizon, which in this period results in a positive strategic NPV, in addition to optimizing the utilization of the airport’s terminal capacity.
VL  - 5
IS  - 3
ER  -

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Author Information

João Carlos Félix Souza
Matheus Martins Silva

Faculty of Technology, University of Brasilia - UnB, Brasilia, Brazil
Luiza Moury Fernandes

Faculty of Technology, University of Brasilia - UnB, Brasilia, Brazil
Guilherme Nóbrega

Faculty of Technology, University of Brasilia - UnB, Brasilia, Brazil
Felipe Moutinho

Faculty of Technology, University of Brasilia - UnB, Brasilia, Brazil

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APA Style

João Carlos Félix Souza, Matheus Martins Silva, Luiza Moury Fernandes, Guilherme Nóbrega, Felipe Moutinho. (2019). A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program. American Journal of Theoretical and Applied Business, 5(3), 47-52. https://doi.org/10.11648/j.ajtab.20190503.11

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ACS Style

João Carlos Félix Souza; Matheus Martins Silva; Luiza Moury Fernandes; Guilherme Nóbrega; Felipe Moutinho. A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program. Am. J. Theor. Appl. Bus. 2019, 5(3), 47-52. doi: 10.11648/j.ajtab.20190503.11

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AMA Style

João Carlos Félix Souza, Matheus Martins Silva, Luiza Moury Fernandes, Guilherme Nóbrega, Felipe Moutinho. A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program. Am J Theor Appl Bus. 2019;5(3):47-52. doi: 10.11648/j.ajtab.20190503.11

Copy | Download

@article{10.11648/j.ajtab.20190503.11,
  author = {João Carlos Félix Souza and Matheus Martins Silva and Luiza Moury Fernandes and Guilherme Nóbrega and Felipe Moutinho},
  title = {A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program},
  journal = {American Journal of Theoretical and Applied Business},
  volume = {5},
  number = {3},
  pages = {47-52},
  doi = {10.11648/j.ajtab.20190503.11},
  url = {https://doi.org/10.11648/j.ajtab.20190503.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ajtab.20190503.11},
  abstract = {The Brazilian government began, in 2012, the program of concessions of the administration of Brazilian airports in order to improve customer service through private capital. One of the main subjects of this concession plan was the airport of Guarulhos, in the state of São Paulo (Brazil), which is the largest airport in the country, responsible on average for over 20,000 flights and transporting approximately 4 million passengers per month. Concessions of this scale demand large investments, which in turn can result in greater uncertainties regarding future cash flows. In certain cases, the NPV (Net Present Value) of these investments may become negative, which does not necessarily mean that the undertaking is unfeasible, or that it should not be encouraged. Changes in the overall economic scenario can subsequently lead to updated results in the expected cash flow, making the investment viable. One of the ways to evaluate a project under an uncertain scenario is to use the Real Options model as a strategic complement to cash flow analysis. This article presents an application to calculate the value of the expansion option for the Guarulhos international airport. For the models of uncertainty related to passenger load and flight volume, the value of the expansion option using the Black-Scholes-Merton model is calculated. The article concludes with the recommendation for the expansion to be carried out on a 4-year horizon, which in this period results in a positive strategic NPV, in addition to optimizing the utilization of the airport’s terminal capacity.},
 year = {2019}
}

Copy | Download

TY  - JOUR
T1  - A Real Options Model for Evaluating Investments in the Guarulhos Airport Concession Program
AU  - João Carlos Félix Souza
AU  - Matheus Martins Silva
AU  - Luiza Moury Fernandes
AU  - Guilherme Nóbrega
AU  - Felipe Moutinho
Y1  - 2019/09/24
PY  - 2019
N1  - https://doi.org/10.11648/j.ajtab.20190503.11
DO  - 10.11648/j.ajtab.20190503.11
T2  - American Journal of Theoretical and Applied Business
JF  - American Journal of Theoretical and Applied Business
JO  - American Journal of Theoretical and Applied Business
SP  - 47
EP  - 52
PB  - Science Publishing Group
SN  - 2469-7842
UR  - https://doi.org/10.11648/j.ajtab.20190503.11
AB  - The Brazilian government began, in 2012, the program of concessions of the administration of Brazilian airports in order to improve customer service through private capital. One of the main subjects of this concession plan was the airport of Guarulhos, in the state of São Paulo (Brazil), which is the largest airport in the country, responsible on average for over 20,000 flights and transporting approximately 4 million passengers per month. Concessions of this scale demand large investments, which in turn can result in greater uncertainties regarding future cash flows. In certain cases, the NPV (Net Present Value) of these investments may become negative, which does not necessarily mean that the undertaking is unfeasible, or that it should not be encouraged. Changes in the overall economic scenario can subsequently lead to updated results in the expected cash flow, making the investment viable. One of the ways to evaluate a project under an uncertain scenario is to use the Real Options model as a strategic complement to cash flow analysis. This article presents an application to calculate the value of the expansion option for the Guarulhos international airport. For the models of uncertainty related to passenger load and flight volume, the value of the expansion option using the Black-Scholes-Merton model is calculated. The article concludes with the recommendation for the expansion to be carried out on a 4-year horizon, which in this period results in a positive strategic NPV, in addition to optimizing the utilization of the airport’s terminal capacity.
VL  - 5
IS  - 3
ER  -

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