The Greek Airports Privatization Saga

By Ioannis Settas (Athens, Greece)

The Athens International Airport privatization and development project (a greenfield BOOT) kicked off in 2001, serving as the main catalyst for all other airport privatizations to follow in Greece … albeit with a long history of delays and missteps being the dominant reality until now.

Due largely to the country’s long, ongoing internal political power struggles and opposing views on privatization models to be adopted, the program has faced many challenges and obstacles with special interest groups finding their way into the mix to be represented through the political struggle.

The essence of these delays is manifest in the money lost for the country from direct investments, as well reduced growth in traffic and its consequence on direct and indirect related income, investments and development.

A good example of this can be seen in the next Greek airport privatization project that took place in in April 2017.  Fraport Greece assumed a 40-year concession of 14 regional airports across Greece. Irrespective of the ongoing debate regarding the details of this transaction, as well as the assessment of qualitative characteristics from its two years of operation, the company will invest 400 million Euros for development works until 2021 (that could well evolve into a total of 1 billion Euros in investments for the 40 year period). Fraport Greece has made an upfront payment of 1,234 billion Euros to the Greek state plus 22,9 million Euros as guaranteed yearly payment for the years to come. Since the start of the concession passenger traffic at the 14 regional airports has expanded by 10,3% in 2017 and 8,9% in 2018. The early year-to-date figures for 2019 show a continuation of this trend.

Caught in the same, painfully slow privatization process is the long-awaited new Crete International Airport project in Kasteli, a 480 million Euro greenfield facility which will replace the existing Heraklion Nikos Kazantzakis Airport. The project was awarded to India’s GMR Airports Limited and Greek contractor GEK-TERNA SA. The Indo-Greek consortium is expected to initiate works late this year and plans to complete the construction program in 60 months, followed by a 35 year operation and management phase.

Last but not least, following another lengthy seesaw scenario, the twenty-year extension of the Athens International Airport S.A. (AIA) concession was finally completed in February 2019, with the government bagging a huge cash windfall of 1.403 billion Euros.

The new 20-year extension, beginning in 2026 and expiring in 2046, will enable AIA to continue the upward passenger growth trend and facilitate additional investments of approximately 2,9 billion Euros in the following years to expand airport capacity. With the concession extension now settled, it is expected that this will also clear the way for the next step in the AIA privatization process – the sale of 30% of the public share, hence transition of the majority of the company’s shares and control to private investors.

The saga of the Greek airports privatization has yet another chapter to be written with concession of the 23 remaining publicly-managed regional airports. In April 2019, the Ministry of Infrastructure, Transport and Networks awarded a contract to Lamda Consulting to assist the ministry in identifying the optimum privatization model for these small regional airports, as well as related terms and conditions for a tender.

With key parts of the script now written, it is safe to assume that even with the considerable delays and lost opportunities, the plot of the Greek airports privatization saga has become clearer, however the next act is likely to see the major players rationalizing and consolidating the current market split.  Stay tuned.

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