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Regional airports yet to fulfill potential(Comtex Business Via Thomson Dialog NewsEdge) Dec 12, 2006 (New World Publishing via COMTEX) [email protected] The development of regional airports in Hungary would likely facilitate significant economic growth in the country's less developed regions, and could even lead to overall national economic development, industry insiders claim. These experts also note, however, that regional airport development in Hungary is still in its infancy. Some argue that state financing is the best way to quickly bring regional airports to maturity, and that the state can later sell the operational rights at opportune moments, while others emphasize the importance of direct promotional activity. "Regional airport services have become increasingly important in terms of European air traffic, and in a wider sense, in terms of the European economy," said Zoltan Jenei, chairman of the Association of Regional Airports (VRSz). "However, while there has been a significant increase in air traffic in Western Europe's regional airports, Hungary's regional facilities are being pushed into the background." According to Jenei, Hungary's regional airports see an annual passenger turnover of 150,000-200,000, compared to 8 million annually at Budapest's Ferihegy Airport. "In my opinion, it's intolerable that there are a high number of international regional airports operating in neighboring countries, but that only three airports in Hungary have international status," Jenei said. He added that there are five international airports in Slovakia and 19 in Romania, while in Hungary, besides Ferihegy, only FlyBalaton Airport in Sarmellek and Debrecen Airport have obtained a permit for a permanently open border. The remaining 14 regional, VRSz-listed airports only have temporary permits, as they do not meet standard requirements to claim international airport status. "These types of airports may handle international air traffic, but then they have to pay a fee to the state after each international landing," Jenei explained, adding that the fees are high and the procedure lengthy. Large-scale developments are required if these airports are to one day become international, and according to Jenei, the state should take on the responsibility for their development, as has been the case in other countries. "At the moment, the amount of state subsidies for regional airport development is insignificant. Basically, local governments are left with the burden, and these governments typically don't have very big budgets," Jenei remarked. He added with some optimism that EU funding will be made available for regional airport development within the framework of the second National Development Plan, even though the resources are not yet available. The Hungarian government signed subsidy contracts with five airports in 2004, and decided to support six airports in 2005. The total amount of state subsidies was Ft 718 million (EUR2.8 million) in the first year, but only Ft 499 million in 2005. As for this year, the Economy and Transport Ministry would not reveal exact figures, but according to a 2005 press statement, the ministry was considering spending roughly Ft 1.1 billion over one and half years to fully develop the regional airport network. "Regional airports offering convenient services could play a significant role in developing Hungary's tourism sector, especially in those regions of the country where public roads and railway connections are underdeveloped," the ministry's communications department said in an e-mail to the BBJ last week. Although the ministry lists the advantages of regional airport development, such as job creation and improvement of neighboring communities, some industry experts say that the amounts being spent are inadequate. "As with establishing railway and road border-crossing stations, airport development is something that the state must take on," Jenei opined. "The few hundred million forints in state subsidies are merely symbolic support. It costs billions to develop an airport." Jenei, however, is determined to move his case forward, and he and his association have a strong lobbying influence. He said the main purpose of the association is to ensure that the state provides an adequate revenue stream for regional airport development. Nonetheless, he also drew attention to another anomaly: While regional airports receive very small amounts, the government spent billions of forints on Ferihegy before the airport was privatized. "If all the money freed up from subsidizing Ferihegy could go to developing regional airports, the situation would improve dramatically," he claimed. The Economy and Transport Ministry, in its e-mail communication, outlined two types of financing for regional airport development. "Some regional airports are regarded as 'high priority' in terms of the country's overall economy, and for which state subsidies from the central budget must be made available," the statement said. "Other airports of more 'local' importance should be developed through funds made available from local governments, regional sources and private investors." Cleared for takeoff A positive example of regional airport development from private capital, Sarmellek's FlyBalaton Airport, operated by Cape Clear Aviation Kft, gained international status in September 2006. In a key prior development, a new terminal was added to the airport late last spring. With the new terminal, the airport is capable of handling 300,000 passengers a year, marketing director Lajos Palko said. "Last year, 25,000 passengers used the airport. We're expecting some 70,000 this year, but our long-term plan is to reach 300,000 passengers per year by 2010," he added. Palko said that state subsidies for developing regional airports amount to only a fraction of what can be done to improve these facilities. "Also, the state could be more involved in promotional activities, which are also very important. The attractiveness of a certain region is important not only to its cities, but to airport operations as well. A well-promoted region will attract more tourists," Palko said. Cape Clear Aviation, owned by Irish and Hungarian investors, obtained the rights in 2004 to develop and operate the Sarmellek airport, which is located at the western end of Lake Balaton. The company prepared a detailed investment program for FlyBalaton that would enable the airport to meet EU standards for regular scheduling of international flights. In all, some Ft 2.5 billion has been invested into the airport, including the building of a European-standard, light steel-structured, 2,300 square-meter terminal building, which was delivered at the beginning of May. Real estate developer Biggeorge's-NV Zrt is developing another regional airport at the end of the lake nearest Budapest - at a former army base in Borgond, near Szekesfehervar. Although actual construction has not started (as the developer is currently waiting for the last permits to arrive), the Ft 20 billion project is expected to generate annual passenger turnover of 1.5 million within ten years. "Obviously, it will take even longer to realize a return on the investment, so we're not expecting to be paid back in full within this decade," said Istvan Hajnal, CEO of Biggeorge's. "But as this is a multi-element business, we're counting on the additional effects of the investment." According to Hajnal, local governments, which own at least a part of most of Hungary's regional airports, are not interested in quick returns on short-term investments; developers are thus forced to think in terms of additional development opportunities. "The surrounding properties will be revalued because of the project, and as property developers, we have plans for creating logistics centers, hotels and commercial units in the near future," Hajnal said. Biggeorge's bought a stake in the local government-formed Alba Airport Kft through last year's purchase of 60-year tenancy rights to a 300-hectare plot from the local governments of Aba and Szekesfehervar. "We've been eyeing airport development opportunities for nearly three years, and we chose the Borgond airport mainly because of its excellent location," said Hajnal, adding that FlyBalaton Airport is not regarded as a real competitor, despite its proximity. "FlyBalaton specializes in serving the Balaton area, while we are calculating on 70% of our passengers targeting Budapest as their primary destination," he noted. Originally, the U.K.-based PlaneStation Group was contracted to build the airport, but due to financial difficulties that led to the firm's bankruptcy, the local government of Szekesfehervar cancelled the contract. Budapest Business Journal Copyright Reproduction or use without permission of editorial or graphic content in any manner is prohibited. (C)2006 New World Publishing Kft. with all rights reserved. |