Athens seeks to change Fraport airports deal – And not a minute too soon….

Reuters reported on Thursday that Greece is trying to change the conditions of a deal to lease 14 regional airports to a joint venture led by German airport operator Fraport, ‘according to an unnamed source familiar with the matter’.

‘The deal, worth 1.2 billion euros (£874.5 million), was agreed in 2014 but has been thrown into jeopardy following the election of the leftist-led, anti-austerity government in January’, but ‘Athens now wants a stake in the consortium, which also includes Greek energy firm Copelouzos, and wants to cut the number of airports in the deal to seven’, continues the unnamed source.

However some of the important details of the deal have not been mentioned in the otherwise impartial Reuters report.

Fraport, the German airport operator, and Greece’s Kopelouzos energy group (who also has a 5% stake in Athens airport) have bid €1.2bn for a concession to run 14 regional Greek airports .

The Greek privatisation agency, formed by the previous government and now abolished, named the German-Greek consortium as the preferred bidder to acquire a 40-year operating lease and ‘invest €330m over the next four years in upgrading airports on popular tourist islands including Kefalonia, Mykonos, Santorini and Rhodes.

Chania international and Thessaloniki International which between them make profits of over €24 million a year, were also included in the deal as a financial inducement.

The purchase price of €1.2bn is due at the time of closing, which was anticipated to be in autumn 2015. In total, the 14 airports served 19.1m passengers last year. Some €1.4bn in investment is envisaged over the 40 year duration of the concession, which, according to sources who are familiar with the matter, is going to be raised by a €14 surcharge from each departing passenger – estimated to bring in an extra 133 million euro a year to the revenues, leaving a tidy profit for the consortium.

There has been strong local opposition to the sale in both Chania and Thessaloniki, where the airports have recently received 110 and 250 million euro of EU funds respectively, to invest in the upgrade of the airports.

The new Syriza government has promised to review the sale, and should do so. The deal looks like a bad one for both the Greek state and the travelling public. The EU competition commission is also likely to block the sale of Chania and Thessaloniki airports, because of the EU development grant involved, which might be seen a subsidy.

Amongst the opponents of the deal as it stands is Ryan Air’s Chief Commercial Officer David O’Brien, who is not a radical leftie. During a visit to Chania and Athens last February, O’Brien said “I think the tender must be re-launched with new conditions,” adding that “instead of a premium, the tender must be connected with targets on passenger traffic. Airports should be given to the one who can guarantee most traffic.”

O’Brien continued to say that “the only thing worse than a state monopoly is a private monopoly” that will only care about passenger traffic in the summer months when Greece needs 12-month tourism.

A senior Greek economy ministry official confirmed that Greek Economy Minister Yiorgos Stathakis had met the CEO and other board members of the German firm on Wednesday in Athens but he declined to comment on whether Greece had asked for a stake in the consortium or to lease a smaller number of airports.