Greek Regional Airports Project in Focus

Transcript of SKAI TV Interview with Dr. Stefan Schulte, Fraport AG Executive Board Chairman (CEO): Conducted in Athens, Greece, by journalist Sia Kosioni for the “Istories” information show broadcast via SKAI TV on Tuesday, May 10, 2016

11.05.2016

Despite the difficulties and the reactions from different parties you are still committed to this investment. So, why are the Greek Regional Airports so important to you?

Because Greece is a beautiful country, because all the Greks that I have already met are very friendly, warm-hearted and service-oriented. And because Greece has a great future and a very attractive tourism industry – and airports are certainly part of tourism. 

Looking at the regional airports – how long the queues are, how bad the infrastructure is – it’s clear that investment is urgently needed. And this is what we would very much like to do.  

According to many people in Greece, also from the government, this is not an investment but a sell-off. Is this true? According to them, the airports were cheap due to the economic crisis; Germany, so to say, is overtaking the airports via a contract which is indeed very beneficial for Fraport.

No, it was an official tender process launched by the government [in 2013]. We submitted by far the highest bid, and therefore won. Let me give you an example: In Lima or other airports around the world, where similar tenders have taken place, the government has always ended up earning a lot more money than if they continued managing the airports themselves. Why?

[At the Greek Regional Airports] we will be investing more than 300 million euros during the first years alone, in order to improve the processes and to increase the capacity. Over the entire concession period, we will be spending a total of more than 1 billion euros [including the 300+ million, followed by maintenance and capacity-driven investments]. The State will remain the owner of the airports. We only have the right to operate them, but we will still invest nonetheless. Furthermore, under the terms of the concession contract the State will receive one-third of the profits – in concrete terms some 28 percent of the profits will be paid yearly to the State. The State will also benefit from better profits, which we can achieve this through good management. 

What are your goals and the specific benefits for Greece?

Let me be very specific. Currently, tourists have to wait a long time at the airports during the summer season. This is not attractive for tourists. They have to wait in line for two hours, maybe more, in the sun. For different handling processes they repeatedly have to stand in line and wait. The airports do not have enough facilities and can not serve everyone wishing to visit Greece – since runways are too small and there is not enough space on the apron for aircraft or for passengers inside the terminals. Our investment will focus on this. This means that there will be better services and comfort. The tourists will be happier and will be able to appreciate good international standards that they know at other airports in Spain, Italy, Turkey, etc. Also, more capacity will lead to more guests for hotels and restaurants – which will result in a more dynamic economic environment. 

Are job redundancies included in your plans?

No, we want to grow. We will pay more than 1 billion euros to the Greek State so that we can operate and invest in the regional airports. Of course, we wish to make profits, but this will happen only if we grow the business. Therefore, we will need more staff and we want to take over as many employees as possible. 

What would you say to the employees who are afraid that a private company, like Fraport, will try to operate the airports at minimum cost? They would say that this makes sense because you wish to make money.

We will not make profits with less staff, but with more staff, more flights, better service, better offers in retail, restaurants etc. – so that passengers are able to buy nice things at the airport. All these things as well as better air connections, for the islands, too – this is how we will make profits. These aspects are very important to us. So, it makes sense for the State to allows us to talk with the employees and make them job offers. We really want to cooperate with them. We operate many airports around the world and we have a very good reputation concerning employee cooperation. 

Will you increase the airport fees?

All of this is stipulated in the concession contract. Fees will not change in the in the begining. Today, every passenger pays 12 euros for a flight inside the Schengen area and 22 euros outside of Schengen. Soon, this amount will be cheaper, with everybody paying an average of 13 euros. So, the same for everybody. In the medium term, when we have made a lot of investments, the fees could increase up 18 euros. However, this amount is still lower than the average fees paid at other airports in the Mediterranean region. There is no need for the islands to be concerned because we also want more passengers. Certainly, we will handle this issue very carefully. 

Dr. Schulte, what has happened with Ryanair? According to many people, Ryanair’s partial withdrawal is connected to Fraport’s presence. Is this true?

Recently, Ryanair announced plans to cancel flights to certain destinations starting already this year. We are not even operating the regional airports this year; we will operate them next year. Obviously, this has nothing to do with Fraport and our partner Copelouzos Group. Probably, some destinations have not been profitable for Ryanair and they are now trying to justify their decision with different arguments. 

Are you worried about the recent reactions by some union members, who characterize the concession contract as scandalous.
 
I believe that our willingness to invest so much money and the fact that we believe in this investment is a very good and positive sign for Greece. During our discussions with other companies, such as airlines, we hear them say:  “Please, go to Greece! Invest! Because we believe in Greece, we want more flights, but this is not possible right now because of the State of the existing infrastructure”. In Frankfurt and elsewhere, we have an excellent relationship with the unions. Once we are operating here and establish good cooperation with them, I believe this situation will change 

Does this issue worry you, though?

No. We have tremendous experience in cooperating with unions, internationally as well as our experience from Frankfurt. I am certain that we will also have a very good cooperation with our employees here in Greece as well. Then, we will see later what happens concerning the unions. 

How is your cooperation with the government? The responsible minister has stated that he has signed the concession contract for the airports “with pain in the heart” or “pain in the soul”, as we say in Greece. Any comments on this?

We have proven that we operate airports successfully and responsibly around the world. Let me use Lima as an example again. The State [Peru] gets a lot more money from the airport than it ever did before, when it was operating the airport itself. The same thing goes for Antalya [Turkey]. This means that we are truly in a position to say that what we do leads to significant growth, an increase in the number of passengers, more comfort. In the end, the government there also admitted: “Yes, it was the right thing to do”. We will work hard to make this happen here, too. 

How is your cooperation? Because I think there are other things that have to be done before new operation of the airports can be launched. The contract must also be ratified by the Greek Parliament. Isn’t this true?

You are one-hundred percent correct. We signed the contract with the government at the end of 2015. The Hellenic Competition Committee has just approved it and ratification by the Greek Parliament should follow next. Overall, though, the steps are being made according to the timeline. Some delays are typical internationally. Afterall, this is an extremely complex project, which requires detailed preparation from both sides. We have to analyze all of the [14] airports: whether there is an environmental certificate missing in some cases or whether there are technical plants that are not working; the staff, how many people are employed? Once again, we want to take over the employees. There are many technical points and, generally, the process is continuing without delay. We have agreed with the governement that our goal for the final deadline to transfer the airports is the end of the year [2016]. We are preparing for this. 

Is it true that a few months ago you had considered withdrawing your bid?

No, this is not true. We have been in intense discussions with the Hellenic Republic Asset Development Fund [HRADF] and the government for over a year. The deadline had to be extended once; there was such a delay. But we have always been committed to this investment project. We certainly believe in Greece and we will continue to do so! 

Are there airports in the project that have priority over others?

Of course, there are airports that hold a higher position on our agenda. This is mainly because some airports have major constraints or some have safety issues. We have to take care of these airports first, during the inital months of operations. We have promised that the so-called first investments, the binding investment as per the contract, will all be completed during the next four years. 

Which airports have safety issues?

We will solve these issues, but we do not talk about this in public.

Is your company interested in making other investments in Greece?

We are a company that operates airports. I would like to invest in hotels, but this is obviously not our job. Everybody does his job. I am glad, though, because we are in discussions with airline companies; also hotel investors have also approached us. I have visited all of the islands, except one – sorry for that – and I have had very good discussions with hotel associations and hotel owners. All of them have said: “Please, come. We need the infrastructure. We need better infrastructure”!

Are you optimistic about the future of Greek economy?

I am opitimistic and always have been! I believe in Greece. It is certainly right to take measures, no matter how difficult this may be, but it is also important to have investments. Only investments can create new jobs, not only cost cutting. Ideally, both need to go hand in hand. It is an important signal that we are so committed and believe in this investment. And really investing, because every single euro that we invest here creates additional jobs in the construction and trades industries, retail and gastronomy, etc. We are ready for this project. Let’s begin. 

So you do not see any risk of a Grexit...

Greece belongs to the Eurozone and will continue to do so. 


– ENDS – 

LINK to Interview

Background Info about Fraport Greece and the Greek Regional Airports Project: 

About the Greek Regional Airports Project – A Win-Win Project for Greece: 

•    The 14 Greek Regional Airports Project is a major private investment. It is considered to be one of the largest privatization projects in Greece and presents significant potential benefits to the tourism sector, Greece’s economy as a whole, the people of the regions served by the regional airports, as well as to millions of international tourists visiting beautiful Greece every year. 

•    In the highly competitive international tourism industry, the 14 regional airports serve as vital gateways for one of the country’s most important sectors. The Greek Regional Airports include 3 mainland gateways (Thessaloniki, Aktion and Kavala) and 11 airports on Greek islands (Chania on Crete, Kerkyra on Corfu, as well as Kefalonia, Kos, Mykonos, Mytilene, Rhodes, Samos, Santorini, Skiathos and Zakynthos). Together, these airports received more than 23 million passengers in 2015 (up 6 percent year-on-year). Around 73 percent of these passengers are international travelers. 

•    In early 2013, Greece’s state-owned Hellenic Republic Asset Development Fund (HRADF) initiated a transparent, international bidding process for two 40-year concessions to operate, maintain and upgrade 7 regional airports under each concession (Cluster A & Cluster B). The Fraport-Copelouzos consortium participated in this tender process which attracted leading international bidders. 

•    HRADF selected the Fraport-Copelouzos consortium as preferred bidder in November 2014 for the 40-year operating concessions for both Clusters A and B, based on the highest bid of 1.234 billion euros for both clusters. 

•    Fraport and Copelouzos Group established their joint company Fraport Greece in 2015 in order to act as the concessionaire for the two concessions.

•    On December 14, 2015, Fraport Greece signed contracts with the HRADF and the Greek state for the 40-year concessions for the two clusters. The contracts are based exactly on the same bid submitted by Fraport-Copelouzos and selected by HRADF in November 2014. 

•    The transaction closing is expected by the end of 2016, at which time full payment of the €1.234 billion euros upfront concession fee will be made by Fraport Greece in tandem with the takeover of operations at the airports. Along with the upfront concession payment, an annual fixed concession fee of 22.9 million euros, plus an annual variable concession fee will be paid. 

•    The Greek Regional Airports are not being sold. Ownership is retained by the Greek State.     

•    During the 40-year concession period, Fraport Greece will be responsible for the operation, maintenance and upgrading of the 14 Greek Regional Airports. Under the contract, around 330 million euros will be invested by Fraport Greece in improving the airports during the first years up to 2020. In subsequent years, further investments can be made for maintenance and possible capacity expansions, depending on traffic volumes – totaling more than 1 billion euros in investments (including the 330 million infrastructure investment in the initial phase).

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