A new crisis looming at Istanbul’s new airport
Becoming fully operational in April, Istanbul`s new airport continues to be a symbol of improper planning, extravagance, and maladministration in Turkey.
A brand new crisis is appearing on the horizon for the Istanbul Airport, the city’s third, which has witnessed problems in many areas from its tender and privileges granted by the state to its construction, service quality, and flight safety.
The due date for the payment of the first instalment of credit taken for the construction of the new airport - Turkey’s highest amount - is drawing near. It is estimated that the new airport, under the existing conditions, is to garner a much lower number of passengers than its 95 million capacity.
The first instalment for the airport will be around 600 million euros and needs to be repaid in October.
“The company is insolvent. Either the partners will put forth the money, or the State Airports Authority shall step in as the guarantor,” one expert said.
While the Cengiz-MAPA-Limak-Kolin-Kalyon Consortium, which won the Istanbul Airport tender with 1.45 billion euros, placed 1.5 billion euros as equity capital for the construction of the facilities; the rest of the amount was funded by two separate credit tranches of 4.5 and 1 billion euros.
The consortium received an additional 1 billion euro loan after the 16-year term, 4-year without principal payment and 4.25 percent annual interest rate loan. The loans, which represented the lion’s share, were borrowed from the public banks.
The members of the consortium are famous for their close relations to Turkish President Recep Tayyip Erdoğan, winning almost all major state tenders throughout the ongoing rule of his Justice and Development Party (AKP).
The part without principal payment for a significant part of the loan constituting the 4.5 billion euro piece is due next month. For this loan, IGA, the company established by the consortium for the operation of the airport, is required to pay in 566 million euros as principal and interest.
Furthermore, there are payments due for the supplementary 1billion euro loan, the conditions of which are undisclosed. With this, the total loan amount to be repaid is estimated to exceed 600 million euros.
On the other hand, IGA, which is required to repay the credit instalment next month, faces severe problems due to economic stagnation and miscalculations.
Despite the airport’s 95 million-passenger capacity, the figures since April point to much lower rates of traffic.
According to the General Directorate of State Airports Authority (DHMI) data, the number of passengers who have travelled through Istanbul airports has been 68.4 million between January and August, pointing to a 0.6 percent decrease year-on-year.
A total of 28.9 million of those passengers used Istanbul Airport between April and August.
The actual numbers of passengers during busy high season for tourism and air traffic supports the estimations that Istanbul Airport shall remain at around 70 million passengers annually.
Calculations show that the company has fallen behind in paying credit loans with its revenues earned from the passenger traffic realized in the April-August period. IGA receives 20 euros for the passengers going abroad from Turkey, 5 euros for international transit passengers and 3 euros for domestic passengers as a service fee.
Over the last five months in which the airport has been in operation, 21.7 million were international, and 7.2 million were domestic passengers. Two-thirds of the international passengers were transit passengers.
According to these figures, the company’s gross revenue obtained from flights remained below 250 million euros.
IGA has side income in addition to the airport, from a number of other projects, such as stores and car parks. Therefore, the five-month revenue is estimated to reach 350 million euros. However, 15-20 percent of operating revenue is to be taken out of this, with the resulting figure showing that the 5-month net income of the company works out to be around 300 million euros.
The estimations during the tender of the airport were that the project’s gross income would reach 2.2 billion euros once all stages were completed and 150-million passenger capacity was reached. Recent figures, on the other hand, show that the total income will reach a maximum of 1 billion euros for the first year that will end in April.
Preliminary data points that the 316.3 million euro of passenger income, a guarantee granted by the government will be easily exceeded for the first year of the airport. This means that the government will not pay for passenger guarantee.
However, this does not mean that the government will not pay at all. Because the State Airports Authority may step in for the payment of the loan, which was taken in 2015 and whose first instalment is due in days.
While the main reason for this is low IGA revenues, another reason is the status of the consortium members that shaped IGA.
All the consortium members are companies from the construction and service sectors, and the cash generation capacity of the consortium members are limited due to existing crises in these sectors. This, in turn, obstructs any support by the partners to IGA for the loan instalment.
On the other hand, the annual rent payment of 1.45 million euros for the airport is another problem. The contract stipulates that rent payment for the initial year is to be repaid in April 2020, the anniversary of the airport’s passage to full capacity.
However, the members of the consortium submitted their request to the Ministry of Transport, asking for a delay of the payment of the first instalment for two years alleging their economic situation as an excuse.
Sources close to Ankara said that the government would accept the delay request, although there is no clear development on this issue. Otherwise, there is no other chance than turning over the company to banks for the partners in the airport, who already are having difficulty paying their loan instalments.