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BUSINESS FOCUS - SHIPPING - NEWLY INDEPENDENT TRADE COMPANIES, THE BRATISLAVA AND KOŠICE AIRPORTS AWAIT INVESTORS

Airports to go private

THE TWO biggest Slovak airports, in the western city of Bratislava and the eastern city of Košice, have launched the first stage of a transformation. On touchdown they hope to become modern and dynamic airports owned by international investors.
At the end of April, Transportation Minister Pavol Prokopovič signed founding documents establishing new trade companies out of what were previously state-subsidised corporations administered by the Slovak Airport Administration. The two stock companies started operations this May.

THE TWO biggest Slovak airports, in the western city of Bratislava and the eastern city of Košice, have launched the first stage of a transformation. On touchdown they hope to become modern and dynamic airports owned by international investors.

At the end of April, Transportation Minister Pavol Prokopovič signed founding documents establishing new trade companies out of what were previously state-subsidised corporations administered by the Slovak Airport Administration. The two stock companies started operations this May.

Although still state-controlled, the companies are supposed to prepare for the entrance of foreign investors. Other smaller airports - Poprad, Sliač, and Piešťany - will remain under state administration, but in the future they will go through the same process of transformation.

"If we want our air transport and infrastructure to develop faster and to be competitive within Europe, we have to invest in them. That is why we had to start the whole process," Tomáš Šarluška, spokesman of the transport minister, told The Slovak Spectator.

The Transportation Ministry plans to announce two privatisation tenders for the Bratislava and Košice airports in 2005. Two independent consulting firms will oversee the whole privatisation process. The ministry intends to choose the advisers by the end of the year.

"The ministry has decided to use privatisation advisers to ensure transparency. In choosing advisers we will not only consider the conditions and method of privatisation; the advisers' experience will be also very important," said Šarluška.

Prokopovič told the television station TA3 that the ministry would insist on one criterion for the advisors - the successful completion of such a transformation process with two or even three airports in the previous 10 years.

However, insiders agree that finding a consulting firm that has experience with two or more such projects could be a problem, even if it is a global player.

In the first stage of transformation, the Transportation Ministry will enable the regions and cities of Bratislava and Košice to enter the airports' independent stock companies. The state, together with cities and consulting companies, will then create a favourable space for a foreign investor.

"We can promise the cities and regions that they will be able to participate. But it is too early to talk about their share. First, the advisor will have to decide what the strategic share will be," Prokopovič told the press.

The cities have already expressed their interest in being involved in the privatisation process. They mostly argue that the airports are located on their territories and districts and they stress that cooperation will be advantageous. Insiders say, however, that although cities are interested, the benefits of their presence in the shareholder structure are not that clear.

"Bratislava claimed a long time ago that it was prepared to be come a partner of the M R Štefánik airport. Previous mayors were of this opinion and the present mayor is as well," Milan Vajda, spokesman for Bratislava's mayor, told The Slovak Spectator.

The experiences of other cities in different countries, he said, prove that the city should be involved. "The city is interested in taking part in the decision-making process concerning the further development of the airport. The airport is in the city's cadastre and is a gate to the capital," he added.

Bratislava would like to prepare the airport together with the state for the future entrance of a foreign investor.

The city of Košice is of the same opinion. "We are interested in acquiring a share in the airport. We also want to cooperate with the Slovak Technical University in Košice on the modernisation of the airport," said Zuzana Bobríková from the Košice press department.

According to Bobríková, Košice airport could be one way of solving the greatest drawback of the region: the lack of transportation infrastructure. "We have the information that northeastern Hungary is willing to cooperate with the Košice airport.

"The airport in Košice is nearer to people living in, let's say, Miskolc [Hungarian city] than the one in Budapest is. In relation to that, the highway connection between Košice and Miskolc is a priority for us," she said.

While Bratislava would like to obtain a share of about 25 to 30 percent of the airport, Košice did not specify its desired stake. But the two cities agreed that they want to wait for the ministry's decision. "The city will accept the share offered by the state," said Bobríková.

The ministry hopes that foreign investors will bring new know-how, business policy, modern equipment, and greater traffic to Slovak airports. Analysts agree that the state must be wiling to sell a majority stake to ensure that investors will have enough space to meet these goals.

According to Šarluška, the invester's share has not yet been determined. The percentage will also depend on the advisor's proposal.

The ministry could keep control over the airports by defining so-called priority infrastructure property - equipment necessary for the basic function of an airport. Investors would not be allowed to sell such property or use it for securing bank loans or other activities that would threaten the facility's operation.

"I think that someone who would invest his money, take over commitments, and pay the bank loans, would, for sure, make an effort to ensure that the airport works effectively. He needs his investment back; thus, I do not expect strict state control will be needed," Gabriel Beer, analyst with Trend weekly, told TA3.

Bratislava and Košice airports, located near the biggest Slovak cities, are considered the most attractive for investors compared to other Slovak airports. Airplanes from Slovak airports carried 694,376 people last year. Bratislava took 69 percent of that number and Košice 27 percent.

"Bratislava and Košice [are most attractive] because they are our biggest airports that fulfil the criteria of international airports. It is thus our interest that these airports get strategic investors first and that their development will be even more dynamic," said minister Prokopovič.

So far, the Vienna airport and Austrian Airlines have declared they would like to be the new owners of the Bratislava airport. The Slovak press reported that there are Argentine and Thai investors who are interested in the Košice airport as well.

"I think Bratislava will be attractive for passengers because it is located in such a favourable region, near Vienna, at the borders of Slovakia, Moravia, and Hungary. Bratislava can compete with Vienna, considering airport fees, and this could generate growth," explained Beer.

He continued: "It is hard to predict when Košice will become interesting for investors. I think this will happen when there are enough people to transport. It will be the same as with other airports. However, I think that Košice will be attractive because there is a vision that the city will be growing. Smaller airports are in a worse situation; they will have to wait."

Bratislava hopes that its investors will bring the main capital for modernisation. The airport needs a new terminal, which might cost about Sk1 billion (€25 million). It certainly would welcome more passengers to more regular destinations.

Just before the Košice airport became an independent company, the Slovak Airport Administration finished a new terminal for more than Sk350 million (€8.7 million). This airport thus has very favourable technical conditions for passengers. The airport need only be filled with life.

The idea for the airport transformation first arose in the mid-1990s, during the government of Vladimír Mečiar, which was known for less-than-transparent privatisation, when there was an effort to sell airports to strong Slovak business lobbies. Analysts agree that airports and Slovak passengers were lucky that did not happen. "It is better to do it [now] - perhaps late, but with a stronger legislative background," said Beer.

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