- A concession may be offered again after four unsuccessful attempts
- State-owned Sofia Airport company to merge into Plovdiv Airport
If there is a Bulgarian city that can compete with Sofia in terms of development opportunities, this is certainly Plovdiv. The country's second biggest city has almost all factors in place except one - a well-developed airport.
Against the background of Plovdiv's economic growth, the city's airport is a loss-maker and works only during the day, sluggishly managed by the state. In the last years the government made four attempts to attract a concessionaire but they all failed. The penultimate tender, held in 2918, attracted the greatest investor interest, but ended in a refusal by the state to award a concession on the airport to the second-ranked participant after the first one withdrew from the race. Thus, the right moment was missed and then the pandemic hit.
With the largest state-owned airport, in Sofia, now run by a private company, Plovdiv Airport has once again attracted attention. Former caretaker transport minister Georgi Todorov has announced that the state-owned company Sofia Airport will merge into Plovdiv Airport to support the development of the latter as an airport operator.
A new concession procedure is being prepared although it's a difficult time for aviation. Vladimir Zaikov, an advisor to Todorov, said that the state should start doing what it has failed to do in the last 20 years. Which means Bulgaria will have to make some investments in Plovdiv Airport before kicking off the procedure.
The good news is that Plovdiv Airport now is offering a greater variety of flights. Low-cost carriers Ryanair and Wizz Air started operating flights from Plovdiv to destinations such as London and Munich this November. The bad news is that the state-owned company still does not know how to negotiate well. Wizz Air's new flights, for example, have been agreed on terms which do not cover the costs.
Operating at a loss
For years, Plovdiv Airport has been an expensive undertaking. The company's latest financial report shows an uncovered loss from previous years of 10.2 million levs (5.2 million euro). The company reported revenues of 4.3 million levs for 2020, of which 2.6 million levs were transferred to the Civil Aviation Administration. This has been happening since 2008 on the basis of a contract between the airport and the Ministry of Transport, according to which the ministry has received support for the staff engaged in airport activities, Zaikov explains. And Plovdiv Airport's loss for the pandemic-marred 2020 is 513 thousand levs.
In order to solve a systemic and market issue, the state decided to take a traditional approach - by transferring some money from one company to another. The process of merging the Sofia Airport company into Plovdiv Airport is currently underway, and according to Vladimir Zaikov, it could take 6 to 8 months.
Sofia Airport is 100% state-owned. After the government granted a concession on the airport in the capital city in 2020, the company lost its functions as an airport operator, but has certain assets such as the Cosmos resort and Balchik Airport.
In September, the caretaker cabinet decided to transfer 60 million levs from the Sofia Airport to support Bulgarian airlines in the context of COVID-19. The airlines insisted on receiving support which was implemented as part of a revision of 2021 budget.
A month earlier, caretaker transport minister Georgi Todorov announced that Sofia Airport company would merge into Plovdiv Airport and in return, Plovdiv Airport will receive nearly 30 million levs. Thus, part of the funds in ownership of Sofia Airport company will be transferred to Bulgarian airlines, and another part - to Plovdiv Airport.
"The shortage of funding for Plovdiv Airport EAD weighs down on the state budget by nearly 1.5 million levs per year. Through the merger which I have proposed, funds will be provided for the development of Plovdiv Airport as an airport operator," Todorov explained.
Where are the flights?
In the last ten years, there have been high expectations for the airport located in a region with robust economic growth which were never met. In the summer of 2009, the state built a new passenger terminal at the airport in Plovdiv worth nearly 40 million levs with a capacity of 1000 passengers at rush hour. These passengers never came, and for 10 years the airport has had a single major customer - Ryanair.
In the last few months, there were several little changes: Irish low-cost carrier recently announced that it will launch a new route from Plovdiv to Dublin in mid-December as part of its winter program, with flights twice a week from January, whereas Wizz Air said it will operate three new routes from Plovdiv - to London, Dortmund and Memmingen.
New concession procedure coming
However, the bigger question about the long-term development of the airport is still on the table. The state probably will make a fifth attempt to lease the airport, and in all likelihood it will seek the services of the European Investment Bank as a consultant, said ex-caretaker transport minister Hristo Alexiev.
Zaikov, who was advisor to Alexiev and is a long-term operating director of Trakia Economic Zone located near Plovdiv participated in the competition for the concession on the airport in 2018. Back then, Trakia Economic Zone ran in tandem with Plovdiv-based cargo transport company PIMK. However, the choice fell on China's HNA Airport Group but the company decided to withdraw from the race after the death of its main shareholder.
After HNA withdrew, the expectations were for the state to sign a contract with the second-ranked candidate - the tie-up of PIMK and Trakia Economic Zone, but this never happened and the procedure was terminated in autumn 2020. Thus, the state missed the offer of 65.5 million euro made by the consortium. The reasons for pressing the brakes on the procedure remain unknown to this day.
Asked by Capital Weekly whether local candidates would join a new concession procedure, Zaikov said: "There is interest, but I can't say how it will be manifested."
According to him, new criteria for the development of the cargo airport should be set and the requirements for granting a concession on it have to be updated. At the same time, the state intends to develop the airport, including through investment in fuel and lubricant storage facilities.