DR. PÉTER NOVOSZÁTH CSc. He is Associate Professor at the Institute of Economics, College of Dunaújváros. H-2401 Dunaújváros, Táncsics M. u. 1/A. Pf. 152. e-mail: [email protected]

He is a co-author of The Development and Operation of Airports published by Dunaprint Ltd. and author of Airport Ownership in the European Union published by Polgari Szemle.

DEVELOPMENT OF REGIONAL AIRPORTS ON -AREA On the basis of German, Austrian, Hungarian, Serbian and Romanian examples

1. Conflicts of decentralised development model of regional airports in Germany

1.1. Airports are prestige objects for regional leaders

Hahn airport, found in the Hunsrueck area of south-western Germany is a growth story that many operators of regional airports in similarly rural locations would love to emulate (Heymann – Vollenkemper, 2005). This explains why a considerable number of small airports have been expanded for commercial operations over the past few years. Further projects are in the planning stage. On the demand side, strong growth in the low-cost segment and bans on night flights at major airports in urban areas have provided support. In Germany the federal states that are ultimately responsible for the planning of airport projects. It is therefore understandable that state politicians often consider the expansion of a regional airport within their remit as more important than urgent infrastructure projects of supra-regional significance. Besides, the idea of having a local airport appeals to many regional politicians partly for prestige reasons. Many structurally weak regions hope to be able to replicate the local economic upswing that came about in the Hunsrueck area with the growth of Hahn airport. There is a little chance of the Hahn success story being repeated elsewhere. It goes without saying that having a small airport close by is a key geographical advantage for businesses. Most of airports project not necessary since Germans basically have sufficient airport capacities at their disposal. For example, it takes 64 % of the population less than 60 minutes to travel to the nearest commercial airport, and 95 % need less than 90 minutes (Luftverkehr für Deutschland, 2006).

1.2. Regional airports usually lack critical mass Economies of scale are of particular significance at airports. The oversupply of regional airports and their under-utilised capacities can meet the demand for slots in nearly all regions of Germany for the foreseeable future – despite the projected growth in air traffic. Many airport facilities incur high fixed costs which cannot be covered if passenger volumes are low. Furthermore, revenues from the second financial pillar, the non-aviation activities, are negligible at airports with little traffic. According to a study done for the European Commission an airport needs a critical mass of 0,5 to 2 millions passengers per year in order for it to be able to cover the cost of its operation. Only five of the 39 regional airports in Germany even passed the 500.000-passenger threshold in 2004. The biggest of them, Padernborn-Lippstadt, recorded no more than 1,3 million. Next in line were Weeze (Niederrhein) with 800.000 passengers and Karlsruhe with 600.000. 33 of the 39 regional airports still do not even handle 100.000 passengers; 19 have less than 10,000 (ADV 2006). 2

1.3. Regional airports under-utilised capacity led to cannibalisation The emergence of additional capacity of regional airports leads to strong cannibalisation of traffic from nearby airports. One example can be seen in the plans to expand the Kassel-Calden airport. This could take passengers away from Paderborn- Lippstadt, located a mere 75 km away. With 1,3 million passengers at present, Paderborn- Lippstadt more or less reached the break-even point for covering its costs. The appearance of a new competitor would probably keep the number of passengers at this airport short of critical mass. This means that jobs would be created in Kassel-Calden to the detriment of jobs in Paderborn-Lippstadt. Neither airport would generate enough business to cover costs, so both would remain dependent on subsidies. Besides, other airports in the area could also lose traffic to Kassel-Calden, e.g. Erfurt. The uncovered costs can be catalyst for neighbouring airports to engage in a subsidy contest in order to persuade an airline to fly from their location. This competition is reflected in low landing fees that are far short of the actual costs and in grants for launching new routes (so-called marketing subsidies). While the European Commission’s decision on Charleroi airport has reduced the possibilities for such subsidy competition, considerable scope remains.

2. Some features of centralised development model of regional airports in

Austria has one main , " International Airport", and five regional airports located in Graz, Innsbruck, , -Hoersching and Salzburg. Each has its own procurement authority and most are undergoing expansion plans. Development and operation of Vienna International Airport, and the five regional airports located in Salzburg, Innsbruck, Linz, Graz and Klagenfurt is divided primarily between state appointed, public airport authorities, and those assigned by the Ministry of Transport. In all cases the state retains responsibility for radio communications, meteorological services and security, customs and immigration control. Air traffic control was formerly part of the Ministry of Transport but was turned into a private firm in 1994. Investment for airport infrastructure development is of increasing importance for regional industry and tourism requirements. Salzburg is the second largest airport in Austria. Due to the relocation of Munich Airport, the catchment area of Salzburg has grown to approximately 2.5 million inhabitants. In 2005, Salzburg's traffic reached 1,695,428 passengers, an increase of 19.24 percent compared to 2004. Total movements increased by 20.2 % in same period (Statistik Austria, 2006). The shares of scheduled passengers increased by 15.03 percent from 44,47 to 59,5 percent in period 2001-2005, while non-scheduled traffic declined from 55,53 to 40.5 percent over the same time frame. The sales revenues stated in the income statement were up by €6,3 million or 17,6 % to € 42,06 million over the previous year. Including work performed by the enterprise and capitalised, the airport achieved profit on ordinary activities of €45,04 million (, 2005). The U.S. firm Greiner Corporation in Tampa, Florida prepared a Master plan with a total investment volume of € 25 million (USD 22.7 million) which planned to invest till the year 2005. The plan included the expansion of the passenger terminal and a car park. Terminal 2 was opened for charter traffic in the end of 2003. A new hall for 100% hold baggage screening was constructed together with Terminal 2 in 2003. The program includes also new ramp service facilities, which completed in 2004. The Authority handled a total of 860,764 passengers in 2005, which is a decline of 0.18 percent compared to 2004. Flight movements totalled 18,880 in 2005. The annual profit of Graz Airport Authority amounted to €2,814,125 (Flughafen Graz, 2005). In October 1995 the Aviation Training Center Austria GmbH started operations. This enterprise is an official training centre for pilots. Graz Airport Authority invested a total of € 62 million 3

(USD 56 million) from 2002 till 2005. Investments included the construction of a tower, a new terminal facility and a general aviation centre. handled 724,760 passengers (1.57 percent over 2004), of which 406,124 were charter passengers (56,04 %) in 2005. Cargo increased by 8.35 percent vis-à-vis 2004. Innsbruck Airport Authority presented its "Master plan 2010" in July 1998. It includes a total investment of € 13 million (USD 11.8 million) for modernisation of the departure facility, the construction of a car park and upgrading and modernisation of the terminal building including the 100% hold baggage screening area. The had a total of 13,955 scheduled movements in 2005, a decline of 6.49 percent. 32,548 tons of cargo were handled, representing an increase of 20.5 percent vis- à-vis 2004. A total of 689,168 passengers were handled a decline of 2.67 percent over 2004. . The annual profit of Linz Airport amounted to €2,5 million (Blue Danube Airport Linz, 2005). Flughafen Linz Authority was built two taxiways to the by 2005 and an additional passenger terminal by 2007. Total investment volume was amount to € 10.9 million (USD 9.9 million). The Airport Authority handled a total of 520,369 passengers in 2005, an increase of 7.95 percent compared to 2004. Total movements increased by 2.51 percent to 9,063 in 2005. Cargo business declined by 6.1 percent. The shares of scheduled passengers increased by 11.03 percent from 82,56 to 93,59 percent in period 2001-2005, while non- scheduled traffic declined from 17,44 to 6.41 percent over the same time frame. The annual profit of Carinthia Airport Authority amounted to €586 thousand (, 2005). The Carinthia Airport Authority invested a total of € 23.4 million (USD 21.3 million) by 2004. Investments included the renovation of the runway and the extension of the aprons, the expansion of the approach system to category III and the construction of a car park.

3. Far behind from competitors - regional airports in Hungary

Despite of regional airports economic role is known as the catalytic impact, arising from the effect that air service accessibility can have on the region served by the airport, development of regional airport has run very lubberly. In Hungary neither regional airport would generate enough revenues yet to reach the break-even point for covering its costs. The Sármellék International Airport (FlyBalaton airport) is owned by the local governments of Sármellék and Zalavár since August 2002, operated by an Irish-Hungarian investment group, Cape Clear Aviation Ltd., since 2004. It has operated as a public airport since 1991 and become the second largest international airport of the country. The airport had 25,000 passengers in 2005 and 80,000 in 2006. There are regular and charter flights from Switzerland, Russia and Germany but the Turkish Riviera and Kopenhagen are also accessible, and from May 2006 London also available by flights. At the arrival of Ryanair’s scheduled flight a new terminal was built as one of the most significant investments in Western Hungary’s Balaton region on a former military base FlyBalaton airport. The investment totalled up to a sum of almost HUF 2 billion with remarkable state subsidies. Following World War Two the Soviet air force had control over the airport until 1990. Between 1946-1968 Debrecen Airport functioned also as an emergency airfield for Budapest Airport. The political transition brought revival of the airport and international civilian traffic was launched together with sports aviation. In 1994 Debrecen Municipal Government realized the need to develop the airport and included it in its development plan. The city purchased the airport and has been steadily developing it. The comprehensive Development Program of Debrecen Airport was launched in 2001, the stages of this development program were as follows: 4

™ May 29, 2001 – Airport status: non commercial airport for domestic flights also open to international traffic; ™ Dec 29, 2001 – Airports status: commercial airport for domestic flights also open to international traffic; ™ May 16, 2002 – Airport status: international airport for domestic flights also open to international traffic; ™ April 22, 2004 – Airport status: permanent border crossing and customs Route.

Till 2004 Debrecen city invested 3,5 billion HUF to buy out, operate and continually develop Debrecen Airport. There are more regional airports in Hungary which could be remarkable in a given greater region, but their facilities less developed than in above-mentioned airports, Sármellék or Debrecen. In this group consist of: - Békéscsaba - Börgönd - Győr-Pér - Pécs-Pogány - Szeged - Taszár Each of these airports situated in such area where well developed business park is working and settled enterprises request to development of local airport. In Transport Policy of Hungarian Government the development of air connections with neighbouring counties is priority (Debrecen, Győr-Pér, Nyíregyháza, Pécs-Pogány, Sármellék, Szeged airports implication to international air traffic is necessary).

4. Waiting for Open Sky - regional airports in Serbia

The network of civil airports in Serbia consist of: Four international airports: Belgrade Pristina (operated by United Nations) Nis Vrsac 28 domestic airport and 11 military airports

UN sanctions, which were in force from 1992 to 1998 and during the NATO bombing in 1999, significantly reduced the air traffic. Simultaneous with the flight ban, imports of equipment and spare parts were prohibited, while the investment activities were minimal until the year 2001. Then with the significant support of international–community funding and technical assistance, recovery and development activities of overall air-traffic capacities had begun. Serbia’s government authorities are aiming to transform the country into a regional centre. In this respect redevelopment of civil aviation sector is a priority. Nis airport, the largest regional airport in Serbia is located in south-east Serbia, near Serbia’s second largest city, Nis. Nis’ runway was severally damaged during the NATO strikes; the apron and terminal building suffered minor damage, while the airport flight- control tower was significantly damaged. The Norwegian Government financed its reconstruction and this airport is currently fully operational. Passenger traffic at this airport is 5 at a low . Further increase of traffic at this airport is expected when the open skies agreement takes place, since it will give airlines the opportunity to land without the prolonged agreements as experienced today. The airport management claims that low-cost carriers such as Ryanair are interested in the flying to the airport.

5. Ready for competition with neighbouring countries - regional airports in Romania

Romania has a well developed airport infrastructure compared to other countries in Eastern Europe. There are 17 commercial airports in service today, most of them opened for international traffic.

Four (4) Ministry of Transportation, Construction and Tourism (MTCT) Airports:

Bucharest – Aurel Vlaicu Airport (BBU), Bucharest – Otopeni-Henri Coanda International Airport (OTP), Constanta - Mihail Kogalniceanu Airport (CND), and Timisoara International Airport (TSR)

Twelve (12) County Council Administration Airports:

Arad International (ARW), Bacau International (BCM), Baia Mare (BAY), Cluj-Napoca ’Someseni International (CLJ), Craiova (CRA), Iasi International (IAS), Oradea (OMR), Satu Mare International (SUJ), Sibiu ’Turnisor’ International (SBZ), Suceava ’Salcea’ (SCV), Targu Mures ’Vidrasau’ International (TGM), Tulcea (TCE)

One (1) Private Airport:

Caransebes (CSB)

Four of the airports (OTP, BBU, TSR, CND) have runways of over 3,200 m (10,500 ft) in length and are capable of handling wide-body aircraft. Three of the airports (BCM, CRA, SUJ) have runways of 2,500 m in length, while the rest of them have runways of 1,800 to 2,000 m. As of December 2006, TCE and CSB are the only airports with no regular flights. Almost all the airports have experienced traffic growth in the last 4 years. Development of Romania’s regional airports is key to the development of the region. These airports enhance competition not only within Romania but also in neighbouring countries. Market studies conducted by the European Organisation for the Safety of Air Navigation (EUROCONTROL) and IATA indicate that Romania currently offers the most widespread opportunities in Europe. 6

6. Some remarks for Hungarian transport policy makers

Example of German decentralised model for development of regional airports not only leads to the development of unprofitable regional airports. It also means that key expansion projects at major airports are held up. Only a few regional airports can be operated economically. Most of them do not have critical mass, cannibalise one another and compete with each other for subsidies. Answer these problems the Austrian model, where shift the authority for planning airports to country level and the competition between airports to greater region level. Each of main regional airports (Salzburg, Graz, Innsbruck, Linz and Klagenfurt) have positive operating profit and develop its infrastructure on the request of market. In Austria the state retains responsibility for radio communications, meteorological services and security, customs and immigration control. The government in this way support investments for airport infrastructure development because of its increasing importance for regional industry and tourism requirements and finally in economy of country. In Serbia development of civil aviation is a priority. Passenger traffic is at a low level yet. However, it is expected to grow significantly after the low-cost carriers start flying to and from this country also. Romania has developed airport infrastructure than Hungary. Development of regional airports is key element to the development of region and country. Romania is ready to compete with neighbouring countries. Regional airports of these countries will be serious competitors of Hungarian regional airports in only near future.

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