Second wave of Greek airport concessions is under way; mainly island airports, but it will be a hard sell

Greece’s economic problems may not be as evident as they once were but one of the requirements placed on the government by the ‘Troika’ of international organisations which arranged its bailout – that infrastructure should be sold or leased – is still valid.


Summary:

  • The Greek Transport Ministry is seeking schemes to develop a further 23 small airports across the country through concession or P3 scenarios;
  • Fraport Greece already has the concession rights on an original 14-airport package from the first stage of this process;
  • But those were much bigger ones and this/these package(s) will be much harder to sell with the largest airport handling under 300,000 passengers in 2017.

Initially, 14 airports were put up for concession and acquired by Fraport Greece, a consortium of the German operator and investor and the Greek energy business development company Copelouzos. In Dec-2016 the Greek government signed a EUR1.2 billion contract with Fraport Greece to lease and manage those airports, mainly in popular tourist islands, including Corfu and Santorini, for 40 years. The deal also included the airport for Greece’s second city, Thessaloniki. It will also invest EUR330 million by 2020, to upgrade facilities and EUR1.4 billion over the term of the lease.

MAP – Fraport Greece was successful in the first wave of Greek airport concessions and now controls 14 airports, including the gateway to Greece’s second city of ThessalonikiSource: CAPA – Centre for Aviation

Actual ownership of the airports is retained by the Greek government throughout the concession term. The contract has not been without its difficulties, as previously reported last year by The Blue Swan DailyConflict between private concessionaire and public owner snags airport privatisation efforts in Greece

At the end of Oct-2018 a long-awaited announcement was made when the Ministry of Infrastructure and Transport delegated the General Transport Directorate to explore development potential and consider alternative recovery plans, including concession and P3 scenarios, for a further 23 regional Greek airports

TABLE – The second wave of possible concessions cover many of Greece’s smaller airportsSource: CAPA – Centre for Aviation and Greece Civil Aviation Authority (Note: No traffic information is available for the Sitia or Kastelorizo airports

Presently, the Hellenic Civil Aviation Authority operates all 23 airports. There are some exotic names in there and some of the airports are recognisable from the holiday islands they serve, in the Aegean Sea and the Peloponnese peninsula. But, this is likely to be a much harder sell for the government.

Firstly, they are all small. The sum total of 2017 passengers at the 21 airports identified here was just 1.4 million and the smallest three each did not get over 5,000 passengers in the entire year. While all but five of them have grown, some quite substantially, in 2018, that total is infinitesimal in the overall scheme of global airport investment.

Moreover, there are no “big name” tourist island or mainland airports like Rhodes, Kos, Mykonos, Santorini, Corfu and Preveza in there, let alone an anchor airport such as Thessaloniki. Thessaloniki’s traffic alone in 2017 was 6.3 million.

Investors will also be wary of such huge growth discrepancies, varying between +73% and -15%. If they are split into two or more sections that is likely to lessen their attraction even more. There is little in the way of indigenous traffic; what growth will come will be from tourism. Growth is strong so far this year (+11.6% throughout Greece from Jan to Aug-2018) and Greece is not over-reliant on any one country to provide those tourists. But there are always inherent risks projecting business plans on one growth factor alone.

CHART – Visitor arrivals in Greece are on the up this year (+11.6% from Jan to Aug-2018) and this arrivals data from 2017 shows the country is not over-reliant on any one market for arrivalsSource: CAPA – Centre for Aviation, EL.STAT and Bank of Greece

At this stage the privatisation is still in its very early days. The Ministry’s decision allows an investigation with the aim of preparing and developing a plan for these airports, taking into account their functionality as well as the prospects for further development and modernisation.