After more than a year of negotiations and two Greek elections, Greece has signed a €1.2-billion, or $1.3-billion, deal with German airport operator Fraport to lease and manage 14 regional airports in the southern European country.
The 14 airports include the country’s second-largest in port city Thessalonika in northern Greece and a series in tourist centers such as the islands of Mykonos, Santorini, Skathos, Rhodos, Korfu and Kos.
The deal between Fraport, which leads a consortium including Greek firm Copelouzos, and the Greek government, has been under negotiation since last November and followed a tender process launched in 2013. Four months ago, there were doubts whether the deal would go through as Greece’s new left-wing government reconsidered the sale of state assets.
It is the government’s first major privatization deal required in return for receiving several European bailouts the past five years. Greece, which would have gone bankrupt without European assistance, is expected to sell state assets originally to be worth up to €50 billion.
Fraport said the transaction will close during fall 2016 and it will then begin operating the airports and pay the takeover sum.
For Fraport, which runs Frankfurt airport, the third-largest in Europe, the deal is attractive as it gains the right to run the regional airports for the next 40 years in one of Europe’s biggest tourist destinations. Tourism is a cornerstone of the Greek economy, making up a fifth of GDP, and it has remained relatively strong despite the country’s debt crisis.
Fraport, listed in Germany's midcap index, has struggled in recent years after it experienced problems with foreign investments, being outbid by rival companies in Portugal and Brazil.
The airports are expected to serve more than 23 million passengers in 2015 and international passengers account for 77 percent of the traffic at these gateways. By comparison, Fraport handled 60 million passengers at its Frankfurt home base.
Fraport, which is listed in Germany’s midcap MDAX index, has struggled in recent years after it has experienced problems with foreign investments, being outbid by other companies in Portugal and Brazil. Fraport needs foreign acquisitions because it faces increasing difficulties to expand in Germany as citizens concerned about noise can block or delay airport extensions.
Some commentators have criticized the fact that Greece’s first move towards privatization benefits Germany, the country’s largest creditor. Germany is providing the lion’s share of the €240-billion bailout that the government in Athens has received since 2009.
Fraport is majority state-owned: more than 50 percent of the company is controlled by Frankfurt and the state of Hesse, where its headquarters and biggest airport are based.
“There’s certainly a conflict of interest,” Axel Troost, a politician for the left-wing opposition party Die Linke, said when the plans for the privatizations of Greek government assets and Fraport’s involvement took shape this summer. “It’s a semi-state owned institution via the state of Hesse.” The question is what happens to the money, he said. “Can it be invested or is it just to serve the debts?”
The Greek government will remain the owner of the airports throughout the term of the concession. Fraport will pay an annual consortium fee of €22.9 million for a majority share and Copelouzos will hold the remaining stake. The deal requires the Fraport-Copelouzos consortium to invest €330 million in airport infrastructure until 2020, and pay for maintenance and traffic-driven capacity investments in the following years.
“Since being selected as preferred bidder more than a year ago, Fraport and Copelouzos have remained steadfastly committed to the Greek regional airports – a win-win project for Greece and its people,” Fraport’s chairman Stefan Schulte said.
This statement was echoed by Dimitris Copelouzos, who is the founder and chairman of Copelouzos Group who called it an important and beneficial investment.
Gerd Höhler is Handelsblatt’s Greece correspondent. Allison Williams contributed to this article. To contact the author: email@example.com