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AUSTRIAN AIRLINES DROPS OUT OF RACE; SLOVAK HEAVYWEIGHTS JOIN COMPETING CONSORTIUMS

Airport privatization lifts off

SLOVAKIA's major airports will shortly land in private hands. Eight bidders have shown interest in buying a majority share in Bratislava's M R Štefánik Airport and Letisko Košice.

SLOVAKIA's major airports will shortly land in private hands. Eight bidders have shown interest in buying a majority share in Bratislava's M R Štefánik Airport and Letisko Košice.

The hope is that a private owner will transform Bratislava's airport into an international hub and extend Košice's airport.

The state intends to maintain a 14-percent stake in each airport. The respective regional governments and municipalities would keep 10-percent shares.

Analysts say that this time around, the quality of the offered investment rather than the best price will determine the winning bid.

Forty-nine applicants declared preliminary interest in the sale. Passenger numbers have increased dramatically. In a few years, experts expect 5 million people to travel through the Bratislava airport annually.

The Budapest Ferihegy Airport serves around 6.5 million people annually. Officials confirmed that Hungary's decision to sell 75 percent of its state-owned airport triggered Slovakia's decision to sell a majority share of its airport assets.

The M R Štefánik Airport is an important base for low-cost airlines.

Among those who submitted preliminary bids for the 66-percent shares are two consortiums involving the two biggest financial groups in Slovakia: J&T and Penta Investment.

The Transportation Ministry said it was satisfied with the number of bidders and the quality of bids submitted. The ministry expects the future investor to acquire both the Bratislava and Košice airports.

Meinl Bank AG is the government's privatization advisor.

The strategic task facing the winning investor will be to extend each airport's capacity. That will require constructing a new terminal and parking facilities and developing overall infrastructure and services for passengers.

In a memo sent to The Slovak Spectator, the director of the ministry's civil air travel department, Branislav Kvasnica, said that the privatization of both airports is the final step in the sector's "transformation process".

Penta belongs to the consortium led by Vienna's international airport, Flughafen Wien AG. The consortium also includes Raiffeisen and Zentralbank Österreich AG (RZB).

Flughafen Wien brings its know-how to the table. It is one of the busiest airports in Central Europe, serving 15 million passengers annually. The RZB adds privatization and Public Private Partnership experience to the bid, while the private equity group Penta will participate through Penta Investments Limited.

The Flughafen consortium sees major opportunities for the economic development of the Vienna and Bratislava airports based on strong growth in the Vienna-Lower Austria-Bratislava region.

The number of passengers in this region is forecasted to increase from the current level of roughly 16 million to approximately 30 million in 2015.

According the consortium, close cooperation between the Vienna and Bratislava airports will allow the best possible development of the market. The bid prepared by the consortium calls for the creation and expansion of traffic connections between Vienna and Bratislava. A new City Airport Train (CAT) would provide Austrian passengers with easier access to Bratislava airport, and vice-versa.

Some people voiced concern that if Flughafen Wien becomes the majority owner of the Bratislava airport, it would use the airport as a cargo transportation hub, which would not be advantageous for Bratislava. Hans Mayer, the spokesman for Flughafen Wien, told The Slovak Spectator that these concerns "are not justified at all".

"Our consortium has submitted comprehensive plans to develop Bratislava airport towards a high standard international airport. Both airports [Bratislava and Kosiče] would offer up-to-date passenger services. Cargo would only be a very small portion to serve exclusively Bratislava's needs," he said, adding that 90 percent of the cargo at Flughafen is transported via passenger planes.

J&T's consortium includes Abertis, a strong company active in motorways, car parks, logistics spaces, telecommunications infrastructures and airports. The consortium also involves British company TBI, which operates 14 airports on the European and American continents. Spanish airport operator Aena is the technical support side of the consortium's equation.

"The consortium that unites airport operation experience with a strong local partner creates the best preconditions for securing the development of air transport in Slovakia," J&T partner Martin Fedor told the news wire SITA.

Miquel Puig, head of the air transport division at Abertis, sees several opportunities for development, including "increasing the number of flights, transported passengers and goods; expanding destinations; and improving airport and commercial services".

According to Fedor, investment activities at Bratislava's airport will require several billions of Slovak crowns over the next five years. He stressed the importance of municipal and county support in terms of infrastructure access, tourism promotion and improved quality of services.

"We expect the number of passengers to increase to 7 to 8 million in 20 years, roughly equivalent to the current potential of Budapest's airport," said Fedor.

He also mentioned plans for a new terminal, since capacity at the M R Štefánik Airport is less than 2 million passengers. The potential investor also intends to attract passengers from neighbouring Austria.

Danish airport operator Copenhagen Airports A/S told SITA that it submitted a preliminary bid to buy Slovakia's state-owned airports. The company has already submitted a bid to buy the Budapest airport as well.

Austrian Airlines, previously considered a strong bidder, dropped out of the competition to concentrate on its core business. A demanding first half of 2005 deepened its pre-tax losses year-on-year by 490 percent, from €18.9 million to €93.6 million. The company's net losses increased from €8.5 million to E63 million.

"Despite the fact that we have continuously improved on our market position since April and that we have recorded some of the best load factors in our history, we will not return in the profit zone within the year. At present the kerosene price trend does not permit us to enter into financial commitments, which would only start to show a profit in the medium- to long-term future," wrote Austrian Airlines' CEO, Vagn Soerensen, in a memo sent to The Slovak Spectator.

"We view our interests and future potential in the Slovak market as being safeguarded by the strong integration of Slovakia into our global network via Vienna, and by our majority shareholding in Slovak Airlines," Soerensen added.

Since the start of the current year, 680,752 passengers have travelled through Bratislava airport, up 49.2 percent year-on-year. Out of this number, 500,702 passengers used scheduled flights; 176,461 passengers booked irregular flights. The airport registered the biggest portion of passengers on international flights.

In an interview with the financial daily Hospodárske noviny, US Congressman John L. Mica said that the Bratislava airport has immense potential and could serve as a gate for diverse economic possibilities.

"You are a gate for all the expanding economies in the East," Mica said.

At the Bratislava airport, construction to extend the check-in area is underway. Also, the check-in process itself should speed up after the airport installs new computer software. The work on the check-in area should be completed by the end of the fall of this year.

Plans are also in the pipeline to extend airport parking. Meanwhile, airport representatives are negotiating with potential investors to launch a restaurant to serve passengers.

Christian Mandl, CEO of SkyEurope, the largest carrier in Slovakia, told The Slovak Spectator that changing the ownership of the airport is in no way an answer to problems facing airlines.

"What is more important for us than knowing the name of the new owner is knowing who is going to manage the airport. It needs to have an effective management, one that is able to make decisions quickly. It is not difficult to start a new connection, but for an airport it takes time to build infrastructure and develop services for the airlines, particularly when the airport infrastructure is always lagging behind the expansion of air traffic," he said.


(Magdalena MacLeod
contributed to this report)

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