New airport taxes stir up a storm


Cyprus is set to have new airports, at Larnaca and Paphos, by 2008 or 2009.

They are being developed under a BOT (Build, Operate, Transfer) agreement with Hermes Airports, who took over ownership and management of the existing facilities from the government of the Republic in 2006 and will operate the existing and new airports for a period of 25 years.
Hermes Airports’ shareholders include Bouygues Batiment International (22 per cent), Cyprus Trading Corporation (11.34 per cent), Hellenic Mining (11.33 per cent), Vancouver Airport Services (11 per cent), Egis Projects (20 per cent), Aer Rianta International (11 per cent), Iacovou Brothers Construction (5.665 per cent), Charilaos Apostolides Public Limited (5.665 per cent),  and Nice – Cote d’ Azur Chamber of Commerce and Industry (two per cent).
Building of the new airports is being undertaken by the French Bouygues,  in cooperation with Iacovou Bros and Charilaos Apostolides. Vancouver Airport Services together with Egis Projects and the Nice Chamber of Commerce are offering their experiences in the operation of the two airports and the Hellenic Mining in the maintenance and supply of construction material. Meanwhile CTC and Ireland’s Aer Rianta have established CTC-ARI Airports Ltd, which has undertaken the operation and management of all trading activities of the two new airports for the 25 year period..
The new airports are expected to raise capacity and offer improved travelling experiences to passengers visiting or transiting the island. Currently well over 30 scheduled airlines fly into the Republic, plus a number of charter companies. As of this year, Cyprus is also being serviced for the first time by a number of low-cost carriers including Excel Airways .
However, airlines, travel agents and passengers are complaining that travellers are already being asked to pay heavily for the new airports - and thesituation will get worse before the end of the year. The existing facilities at Larnaca and Paphos are set to become the most expensive leisure-based airports in the Mediterranean following price increases to be imposed by Hermes.
The IATA has condemned the moves by Hermes, which will increase airport taxes by a massive 70 per cent this year. In a statement on the subject at the beginning of April, IATA said: “Each passenger will have to pay an additional CYP7 ($16.4) . Passengers are price-sensitive and the new charges will push Cyprus well up the expensive airports league in the region, making it less attractive to travellers. At a time when airlines have managed to reduce costs and improve efficiency, Hermes Airports is going in the other direction.”
Airport charges increased by 47 per cent on April 1 and further increases in July and November will push the total increase to 70 per cent by the end of the year.
“This is unacceptable”, said IATA. “Airlines and their passengers should be paying for the services they use and should not be billed for future infrastructure projects. No other industry pre-charges in this way. Nor should airports.
“This is yet another example of a monopoly service provider doing what it pleases. We have seen this behaviour elsewhere in Europe and have been forced to take legal action against airports and governments in France and the Netherlands over unjustified increases in charges. This is also why the European Commission has heeded our call for economic regulation of airports and is currently drafting a directive to put a stop to these practices. Hermes and the Government must think again before killing the goose that lays the golden eggs.”
The views are echoed by the The International Air Carrier Association (IACA), which has stepped up a campaign to raise awareness of the impact of the hikes on an island which has always listed tourism as a major revenue earner. Following a benchmarking exercise, IACA found that the new Cypriot charges would be “at least 100 per cent more expensive compared to other Mediterranean leisure-based airports”. As a result, the island is in danger of pricing itself out of the market and inflicting long-term damage to the country's tourism industry.
An IACA statement said: “Airport charges must reflect the quality and level of services provided at airports. While IACA airlines fully support initiatives to develop airport infrastructure, it is clear that airlines cannot be used to pre-finance such projects.”
Sylviane Lust, IACA director general, added: “These charges and fees fly in the face of the standards set by the aviation industry on charges…”
Hermes, which took over the management of Larnaca and Phaphos airports in May 2006, said the increases are legal and justified and form part of the agreement it signed with the government of the Republic in 2005. It also points to lower-than-expected growth in 2006 and 2007. The government’s statistical services said arrivals for January and February 2007 were down 4.6 per cent compared to last year, with decreases in arrivals from the UK and France but increases from Germany and Greece. Furthermore, Hermes say airport fees in Cyprus were originally ‘much too low’.
The increases being passed on to passengers are as a result of a series of new charges being imposed by Hermes for handling, security, fuel throughput and fire services. The government, which no longer contributes to the costs of the airports, will also have a concession fee allowing it to take 33 per cent of revenues earned from the airlines without any financial risk or any commitment to re-invest it back into airport infrastructure.
By Gina Coleman