Tuesday, December 17, 2013

TAV to pay less after Skopje success

Skopje Airport’s busy year comes at a price

TAV Airports Holding, which runs Skopje Alexander the Great Airport, will pay the Macedonian government significantly less for its twenty year concession of the airport since it will handle over one million passengers this year. Under the agreement signed with the Macedonian government, TAV’s fees are reduced based on the airport’s performance. Once the airport handles over one million passengers fees are reduced from 15% of gross income to 2% of the airport’s turnover. As a result, the Turkish operator will provide the government only between 350.000 to 700.000 euros this year compared to 2.7 million in 2012. The operator estimates Skopje will handle up to five million passengers in the coming years.

TAV’s concession fee will no longer cover the subsidies the Macedonian government provides to low cost airlines such as Wizz Air to operate flights to Skopje. Ironically, it is Wizz Air which has led to such impressive passenger growth at Macedonia’s busiest airport and in turn lowered TAV’s concession fee. Currently, the Macedonian government subsidises six of Wizz Air’s routes out of Skopje to the tune of 1.4 million euros and will continue to do so until 2015. In addition, TAV provides incentives to low cost airlines by lowering landing and handling fees. The government’s initiative to subsidise low cost carriers came after talks for Turkish Airlines to base an aircraft in the Macedonian capital failed.

Macedonia’s two international airports, Skopje and Ohrid, have handled 1.003.168 passengers over the past eleven months, climbing 19% on last year. TAV will manage both airports until 2030 and has invested 120 million euros in the construction of a new terminal in Skopje and the overhaul of Ohrid Airport’s passenger terminal. The concession agreement also requires TAV to build a cargo terminal in Štip, which it has delayed until 2020. In 2012 TAV’s revenue in Macedonia totalled 18.4 million euros but it ended the year with a 10.3 million euro loss, according to the Macedonian Central Registry.

74 comments:

  1. I find this very interesting. Shows that there are two sides to every story. But an airport, which has a monopoly, operating with a loss of that kind is an absolute disaster.

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    1. Хахахахахах the Turks screwed you :D

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  2. If you ask any potential investor about the prospect of airports in ExYU, they will raise serious concerns and name BEG and ZAG as the only airports that can earn some decent money. Everything else is just too low in numbers + burdened by heavy nationalist agenda of their goverments + endless corruption + countless employees. Such structure makes 2M pax the absolute minimum for a profitable, market-oriented airport. Anything else requires 'small text paragraphs' as well as 'special arrangements' with the government, otherwise there would be no profit.

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    1. I thought Dubrovnik was well managed. Aren't they? Would be interesting if someone could provide us with financial performance of Croatia's airports.

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    2. Actually both SPU and DBV have very good management and healthy profits ;)

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    3. Do you know how much money they made last year?

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    4. Actually SPU and DBV have bigger profits than ZAG in last few years. That is not real, and it is product of some interest concerning concession which is questionable in legal side. Profit of those airports is approximately 2,5 to 3 million EUR per year. In ZAG best time, during Matković was CEO, profit was around 6 million EUR. Today ZAG profit is little more than 1 million EUR. But as I said it is not real.

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    5. So you are saying their accountants were creative in order to lower the value for the French?

      Profits for DBV and SPU are very good. Especially since they are more or less dead during the winter. I suppose they give out seasonal contracts to a large part of their employees or...?

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    6. What I meant above is that investors who are interested in concessions would hardly show any interest if there wasn't for some 'special conditions' in contracts - usually at the expense of taxpayers. Without special conditions, pax numbers are too small to provide profits worthy of investments that reach dozens/hundreds of millions.

      Of course airports as such can be profitable. It's just that being profitable and being worthy of a concession (that would include a major strategic investment) are two different things. Investors won't bother with a 100M+ concession over a 2-3M annual profit.

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    7. That is a nonsense,

      Ljubljana Airport is making good profit and they financed their own expansion out of profits they've made with EU funds covering only 25% o the total cost.


      Dubrovnik Airport has fully financed new terminal out of its profits, although they're now looking to get $300 millioon for furtehr investments in to the airport, half will come from the EU, 25% of Dubrovnik airport's own financial reserves and 25% of the Government of Croatia and Dubrovnik Commune.

      Split airport is about to embark on major investment with construction of new terminal in 2014, but before that airport financed out of its own financial reserves (all profits) construction of 45000sqm platform and few other bits such as buying off land that airport needs for expansion.

      New 35000sqm terminal will be financed out of profits and with the EU funds (50/50)

      Zadar and Pula also make decent profits, Zadar has financed construction of its own terminal way back in 2007 purely out of its own profits.

      Only unprofitable airports in Croatia are Osijek, Rijeka and Brac for obvious reasons.

      However, Rijeka might turn profitable this year.

      To be a profitable airport must have a bare minimum of 100 0000pax, to guarantee some profits, but to be truly self sufficient and not depend on state subsidies and handouts, 300 000 pax should be sufficient for decent profitable operation.

      Zagreb manges around $8-10 million of profits annually, Split around $4-5 million and Dubrovnik Airport around $3-4 million.

      Zadar hopes to make around $1 million this year and 1.2 million in 2014. Pula made around $550 000 profits in 2012 (around 3 million kuna).

      As long as airport has decent numbers it'll turn profitable, btw Zagreb airport would be a lot more profitable had the old director remained and wasn't replaced by that HDZ goon Tonci the crock.

      Under bosko matkovic airport was making really good profits and setting aside large chunks for new terminal. Airport at the time when he left had 230 million kuna in financial reserves (all profits since 2000) to be used for construction of new terminal.

      When HDZ man came in these reserves dimpled down to 180 million over night,

      You wonder how can an extremely profitable institution loose 50 million kuna without any major investment, something I am sure USKOK will need to take a look at.

      USKOK is Croatian Anti corruption agency, they're responsible for major organized crime busts in past 4-5 years in Croatia and Ivo Sanader is facing 10 years in prison cause of Uskok's work.







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    8. What kind of investment is Dubrovnik going to make? Will they expand the terminal?

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    9. @AnonymousDecember 17, 2013 at 1:56 PM

      yes, they're knocking down old arrival gates and 2nd terminal will be built there, you can Google for it to see the concrete plans, once terminal is up they'll add 4 passenger boarding bridges and new 150 000sqm platform will be added, with new cargo terminal, airport city complex and an 4* hotel as well as 1000 car multistory car park.

      Majority of the investment will be on the support infrastructure, such as new platform, new fuel tanks and so on.

      they might add another level to current Air Traffic control tower, increase its height to 50m from current 30m.

      Total investment is valued at 220 million euros http://www.business.hr/ulaganja/za-obnovu-i-razvoj-zracne-luke-dubrovnik-220-milijuna-eura

      EU bi trebao dati oko 130 miljuna eura.





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    10. Anonymous, can you tell us where you're from?

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    11. Ok, so how can i contact you?

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    12. Wait, what? There are three Purgers on this blog?

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    13. No, there is one. Anonymous, leave me some contacts, i have some project for you.

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  3. I wonder what else the concession agreement has writen in it. Same goes for Zagreb and same goes in the future for Belgrade.

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    1. You don't want to know what is in ZAG concession contract. After it was changed, it is not in good interest of Republic of Croatia, that's for sure...

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    2. @AnonymousDecember 17, 2013 at 12:57 PM



      And you know that cause you put the signature on the contract ??

      how can a $400 million investment and $1.5 billion pay out over 30 years be bad for the state ????


      The French company gurantees to make Zagreb Airport to make huge profits and large traffic.

      For French to make really decent profits they'd need to have a bare minimum of 5 million pax per year, and they plan to have that by 2020, and 8 million by 2025.

      Clerly they have worked out their strategy as to how they'll attract other airlines in and make huge profits for they'll need to pay Croatian State annually in excess of $50 million for next 30 years, and you can only make that with a large traffic, not with 2-3 million pax.



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    3. And where did you read this story for little children?

      New contract that was published doesn't have anything with old contract. In case of French did not have profit it will go to expanse of budget. 1,5 billon USD for concession fee? Sure, it will happened as it happens with Istria Y... upssss... same concessionaire!

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    4. I know, because I have copies of old and changed contract.

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    5. @AnonymousDecember 17, 2013 at 4:16 PM

      only for limited time, specifically, until 2015 or the state has rights to cancel the contract and build the terminal itself.

      It is unlikely new concessionaire will be able to pay out $50 million until it hits 5 million pax, but they'll be able to pay around $10-12 million but once they pass 8 million mark they are certain to pay out $50 million as per agreement.

      Only changes to the contract were initial construction phase and if concessionaire can't drive the traffic beyond 3 million pax after 2015.
      Amendment was made for them to transfer payments once the traffic figure is above certain number of passengers which is around 5 million if I am not mistaken.

      No matter what concessionaire must pay $1.5 billion by the contracts end, only difference is the tempo and size of payments in first 2-3 years as terminal is being built.

      For concessionaire it would be rather bad business not to have more traffic at the airport as they'll still need to pay hefty concession at the end of the contract.


      Most likely scenario is now, they'll give discount to all new airlines (invited) up to 50% off on landing and handling charges.

      I am referring to primarily low cost airlines, Norwegian Shuttle, EasyJet, Vueling, Air Berlin, WizzAir, GermanWings, Germania, Air One, Transavia, Pegasus Airlines, Air Baltic, Flybe...

      Of legacy carriers, SAS, Finnair, Brussels Air, Iberia (increase its presence), Swiss, LOT, Czech Air, Alitalia & KLM,


      However not all will come at first, but
      eventually Zagreb should be served with around 30 foreign carriers, at least 5-6 low cost.

      By 2025 Zagreb should be served by all major legacy carriers in the EU, if not all, 95% of them and at least a dozen or so low cost carriers.

















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    6. And what about this NEW articles about Croatian airlines risk, possible bankruptcy, delay of payment and refouns of Republic of Croatia in that case. Malev scenario in NEW contract?

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  4. Because Macedonian government subsidies Wizzair
    = SKP grow to 1 million

    Now when SKP is on 1 million Macedonia will get less money!
    = there would be not enough money even for Wizz subsidiary

    What kind of stupid deal is that? When TAV has more passengers they get more money. Why than reduction in concession fee? And why Macedonian Government invest in subvention to Wizz and in same time gets possible to loose huge amount of money on concession fee? Why they did that? I will never subvent Wizz if that will give me less money in future!!!!

    And than they have obligation to pay another 2 yeas huge amount of money to Wizz but in same time they will get less from TAV?

    Corruption, nothing else...

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  5. So if Macedonia did not subvent Wizzair SKP would have less then million passengers and they would profit 7.500.000,00 EUR in another 3 years (till 2015 when obligation is to subvent Wizz).

    But because of million EUR investment Macedonia will now lose approximately 3.000.000,00 EUR (1 million per year till 2015). Stupid contract by which they will lost more than 10.000.000,00 EUR.

    And now we can see why this record expansion of some 20% per year. How lucky for TAV that they grow to just little more than 1.000.000 passengers and to get this reduction of concession fee from 15% to just funny little 2%.

    What do you thing, will SKP after that TAV goal still grow 20% per year? I don't think so...

    Balkane, Balkane, Balkane moooooj....

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  6. How comes that experience company such as TAV can lose 10 million EUR on 18 million revenue? It is because they finance unreal 20% increase of passengers number to get to 1 million passengers goal when they will pay just 350.000 EUR per year instead of 2,7 million. That is 2,4 million EUR savings, and some 40 million EUR till end of concession.

    And in same time Macedonia will lost millions of EUR in Wizz subvention.

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    1. If this is all true than it seem completly counter intuitive. I understand the reduction in % when the numbers are up but to this extent...

      There must be something else here that us average folks don't know. I'd love to hear from someone close to the matter why would somebody structure the contract in such a way.

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    2. I dont think it has to do with corruption at all.
      More so with too big and unreal expectations.
      To pay subsidies to Wizz with the 15% fee on
      gross income is actually a very good idea.

      But without lowering the fees Skopje Airport obviously does not make profit.
      If there would be an extreme growth there still would be the possibility to subsidize Wizz even with these lower fees.
      But from where can this extreme growth come?
      That is the real problem.

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  7. Wow nice to finally see an on-topic discussion with rational arguments. I think the govt. might have jumped the gun with giving subsidies to Wizz because I think they would have started flying to SKP anyway. All loads on their flights are over 80% which means they would make money without subsidies. Also they fly to Tuzla without any subsidies (yes they don’t pay handling/landing but they are not paid to fly there). So I think that was a mistake since I think Wizz would have come anyway. We will see how things turn out.

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    1. Without subsidies tickets would be more expensive and loads would be lower.

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    2. ...and even questionable if that lower LF with more expensive ticket would even make Wizz flights possible...

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    3. Without Tuzla Canton financial support the Wizz would not have come to Tuzla!
      Banja Luka (i.e. Republika Srpska) have decided not to subsidize Banja Luka Airport (and/or the carrier) and no one came there.

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  8. Some people here are really close-minded. Yes, the Macedonian government pays subsidies in order to increase the passenger number at the airport. With increased number in passengers, more native people start using the services and therefore helping the economy (getting to the airport costs money, drinking coffee in the airport while waiting to board. When you pay for the coffee, 18% goes as a tax to the government) and there are endless examples like this simply showing that the economy overall is improving because of the subsidies. Also, more tourist use come to visit the country and there is a benefit there.

    How efficient is the decision from the Government is another question, which I hope they have thought of and made some calculation whether or not it pays off to give subsidies to Wizzair and get only 2% of gross income after 1.000.000 passengers.

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  9. I completely agree with Anonymus 12:22.

    And about the other comments. First of all the subventions which are payed to Wizzair are not even 1/30 compared to all what have you payed dear ex-yu countries to your defunct JU, OU, JA, YM, JP...And all of them can go belly up every moment. Even Air Serbia with this 55% LF (don't say its a new airline, it's just rebranded- flights were in Amadeus for months).
    2. The contract sets an implicite messaage. We TAV develop your airport and aviation and you as Macedonia profit from it- more tourists, more taxes by spenditure of VFR pax, more Kosovars and Serbs comming to fly from SKP and spend some money there..So while the first component grows, the second (the direct fees) decline. If it was otherwise there would habe been a motivation of TAV to set sky high prices and to operate the airport for 20yrs. on max. profit with 500k pax. For sure this is not in interest of Macedonia.
    3. Third point: Accounting!! Where do these accounting -10 come from?
    People in accounting you can inherit the loss made in 1 year in the next subsequent 5 years in order to pay lower taxes. This means the airport invested 200 Mio. in 2011. That was accounted as expenditure. It made revenue but not enough to cover the 200mio. 2012 the same, 2013 the same and as long this investment of 200mio. is not fuly covered they have the right to exempt it from the tax basis. By such investment the NPV of the project for a min. of 10yrs.




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    1. JU's business strategy has nothing to do with the old Jat. Most flights were not in the system for months, maximum two. Don't spread misinformation just because your honeymoon with TAV is over.

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    2. Except it wasn't TAV who developed SKP to the golden line of 1M - it was the taxpayers of Macedonia. They paid for increased pax and the Wizz deal. TAV will now reap the benefits of a public investment.

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  10. That's simly missleading.
    The only new destination in Nov. was Abu Dhabi.

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    1. When you buy a ruined house in order to refurbish it make it functional again, it is not the same house anymore. Same address, yes, same foundations and outer walls, maybe the same room plan inside, but everything else will be new - starting from the way the household is run and taken care of. So even if your neighbors insist it is the same old ruin, it is not. And serious refurbishments take months before they produce any effect, so when your neighbors give it a few weeks before they conclude it's all the same crap, it is because they never managed a project in their life or they are simply malicious. There is no guarantee the house will survive after you refurbish it but there is also no freakin crystal ball in which your funny neighbors can foresee it is the same old crap. It takes time for such brave judgments.

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    2. Of course... but what you can see now is that you have a crap air company can not manage expansion (every day delays) with very low LF, too low for just few more frequencies in same routes.

      And this story about rebuild house is nice, but that is air company what we are talking about, and everything in air companies is well known, even rebrending and new wave system. And nothing more is here in Air Serbia. And one old habit: Joke About Time.

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    3. Dude, I really think it's about time you accept that Air Serbia won't shut down its operations the next morning due to your low opinion on them. Nor the visitors of this blog will embrace your 'I give you 6 days to put two decades of decline in order, otherwise you are same old crap and I will give public speech about it every day' philosophy. You'll just have to give it some time before you can open the champagne over thir bust.

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    4. True, but I was not the one who said everything will be changed in a day, and company will be profitable in 2014.

      And those delays were not even near with old Jat. So, situation is even much worst.

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    5. Problems with new pipeline affecting all airlines.

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  11. OT. Geruda is joining SkyTeam in March 2013

    How is this going to affect their their acquisition of OU or that ship has sailed already with the end of the bidding process. i noticed ministry officials were saying that there is still some interest.

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    1. Or it's maybe one of the reasons why decided to bail out of it considering OU's membership in Star Alliance

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    2. OU can leave Star Alliance anytime and thay have to pay just 2 million EUR.

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  12. What acquisition of OU?

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    1. Wasn't Geruda Indonesia one of the possible bidders in the recent, unsuccessful tender for acquisition of Croatia Airlines?

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    2. In that case it is their alleged acquisition of OU - something that is yet to be proven anything but a small speculation with no serious intentions behind it.

      The way you put it sounds as if they were halway to inking the contract and there is now a sudden new obstacle with alliances.

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  13. I know I'll sound lame but what's happening with JU?!?
    Today again massive delays FRA, ATH delayed by 3h.. How do they expect to attract transfer passengers from ATH by delaying it 3h.. And all this with dozens of free aircraft..

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    1. Refueling problems. My girlfriend is on the flight to FRA and they were waiting for the airport fuel truck for 3h. I dont know whats going on with JU and NIS but they need to sort it out quick..

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    2. Maybe NIS want the money Jat owes them... They are Jat's only major creditor who is not state-owned :)

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    3. First catering was excuse now NIS...

      Good CEO will settle that in second. Contract, and BEG or NIS has to pay if there is delays because of their fault. If that happens again change business partner. NIS is not the only one that can sell you petrol.

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    4. One of the NIS fuel pumps went out of order, the delays have nothing to do with Air Serbia.

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    5. Fu...k airport where they have collapse when one fuel pump went out of order...

      ...that is for e-mail series "Just in Serbia" which make us laugh every week.

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    6. Belgrade airport is currently providing fuel for all airlines. How long will they stand ?

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    7. ...and is not doing a good job concerning huge delays

      ...what kind of airport and patrol company you have there! One pump is out and you have chaos.

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    8. Pipeline problems, all carriers affected.

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    9. pipeline problems,sewage problems...

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    10. If that single pump is such a weak link then BEG is more of a joke I ever thought it could be.

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    11. BEG can not handle little more catering (not that they are serving Beluga caviar and Dom Parignon champagne).

      BEG has problem with single pump for gas.

      BEG can not hanle 5 planes in same time, it is mess if they come in 5 mintues.

      Collapse of air-bridge.

      ...that is joke of airport.

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  14. Thx for the info!
    I thought it was only yesterday.

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  15. It's all about politics. The FYR Macedonian government is just megalomaniac. The EU criticized that the building of Skopje 2014 will cost more then half a billion € in one of the poorest countries of Europe creating an Astana like monster in a once nice city center. Same with the airport. The government wants to push the building at any price. Since the EU-Erdogan deal is that FYROM is part of the turkish influence zone, TAV had to build it and screwed them now 100%!

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    1. This comment has been removed by a blog administrator.

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    2. It's not up to you to make analysis who and how should be a country other than yours managed.
      Take care of delays of your national airline which was only taken over in order to get the airport for free..
      Take care about cutting on wages and public spenditure in your country whose state budget is on the verge of collaps (these are words of the finance minister Krstic). Take care about the negotiations in which Kosovo beated you in every single point..
      But no, you prefer to take care about Macedonia, Montenegro, Croatia.. You must feed yourself with nationalist crap in order to survive.

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    3. Ah so it's not about cheap agricultural land anymore... Now it's about the airport? Good to know :)

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    4. Of course it is about cheap agricultural land. But few days ago we learned that it is about airport too. In same time.

      Well, to big price for crap of airline.

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    5. HAHAHAHA "It's not up to you to make analysis who and how should be a country other than yours managed", he says and than in the very next sentience he starts talking about AirSERBIA and Kosovo HAHAHA

      Priceless :)

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    6. wow, if anonymous 11:09 is the same as from 9:28, than my friend you have to see a specialist for your problem. Seriously.

      If you are not (but I am sure you are), than sorry mate (11:09) your are not hypocritical, just plane angry...or sad...I don't know.
      Either way, you should get help too

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  16. Offtopic:
    Will someone look at Air Serbia's departure times today - insane delays. May I suggest to Ex-Yu to investigate a bit and if and how the airline plans to solve this (can be an interesting day's article)?

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    1. ROFL. Air Serbia is even worse than Joke About Time. I wonder how much money they are losing rerouting pax on other airlines (missed connections).

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    2. If there is problems with pumps, how comes that almost all foreign companies departure on time (just 3 or 4 flights were late)?

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    3. Actually, that's a good point Milane.
      So far no one officially went public and discussed all of the issues and what they plan to do about it.

      On the other hand it may be that AirSERBIA sees this as airport problem (catering, fuel...all to do with external services) and doesn't want to comment on it.
      Nevertheless it does affect them and they should address it.

      ExYu, if you can get someone to talk to you about it, that would be great :)

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  17. Off-topic:
    Has there been a complete report on the Zurich airport accident with the CA bird?
    Finally, what was the cause? Poor maintenance, construction problem or something else.

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