POLAND

Hundreds of millions of euros have gone from the European Union’s coffers into Polish airports. Passengers aren’t following. No-fly zone

BY CHRISTIAN LOWE AND WIKTOR SZARY PHOTOS BY KACPER PEMPEL

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READY FOR ACTION: The new airport at Lodz, pictured on pages 1-7, opened in 2012. The EU provided around 30 million euros for the project, which was based on a forecast of 1.35 million passengers in 2013. Photographer Kacper Pempel spent a day at the airport in October 2014 and found travellers scarce. REUTERS/KACPER PEMPEL

LODZ, POLAND, DECEMBER 14, 2014 red, according to industry body Airports but Reuters has reviewed data on three Council International. Some cost much sites where traffic fell dramatically short of he European Union has given more to build than the Polish projects. One forecasts. Poland more than 100 million eu- airport in eastern Spain, open for three Poland is often touted by as Tros ($125 million) to build at least years, has so far received not a single flight. one of the most efficient users of EU aid, three “ghost” airports in places where there But Poland is striking because the coun- and there is no suggestion the country used are not enough passengers to keep them in try received so much money for its projects EU airport money corruptly. European business. from EU funds. help has been vital in improving Poland’s The result is gleaming new airport ter- Poland received 615.7 million euros aviation infrastructure, only a small share minals which, even at the peak of the holi- in EU support for airports between 2007 of the country’s airport spending has been day season, echo to the sound of empty and 2013, according to figures supplied on white elephants, and passenger short- concourses and spend millions trying to to Reuters by the European Commission. falls may have been exacerbated by the attract . That was almost twice as much as the next 2008 global financial crisis. Spokespeople Poland is not the only country in Europe biggest recipient, Spain, and more than a at some airports said the projects could be to have built airports that struggle to attract third of all member states’ money for air- considered a success because they were cre- flights. Around 80 airports in Europe at- ports (see chart). The government declined ating jobs, bringing in tourists, and driving tract fewer than 1 million passengers a year, to provide all the information on which it investment in the regional economy. and about three-quarters of those are in the based its decisions to invest in the airports, Text continues on page 4

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Project “Quartz”

Poland’s next big European-funded airport project is at Szymany, a remote airfield which the CIA used just over a decade ago to transport al Qaeda suspects to a secret interrogation centre it ran in Poland. Khalid Sheikh Mohammed, alleged mastermind of the Sept. 11, 2001 attacks, was probably among detainees who landed at the airfield en route to the CIA facility, code named “Quartz,” in a nearby forest, according to a Council of Europe report. A U.S. Senate report said last week the CIA operated a jail near the airport, though it made no mention of the airport. Polish officials have not acknowledged the existence of the CIA jail. Former President Aleksander Kwasniewski said after the Senate report he knew the CIA was holding But it is clear mistakes were made in Jacek Krawczyk, the former chairman of detainees there, but did not know they were Poland, planning officials and aviation ex- the board of Polish national LOT being abused by interrogators. ecutives say. The whole experience raises who sometimes advises the European Now, a 48.6 million euro ($60 million) questions about how the government will Commission on aviation policy, said Poland project is underway to create an international handle the next big injection of EU money, was no worse than other EU countries at airport on the site of the airfield. Just over which it expects to be 82 billion euros over building airports, but the sheer volume of half the cost will come from the EU. the next seven years. EU money it was trying to absorb in a short The airport’s operator, Warmia i Mazury The problem is most striking at the re- space of time explained some problems. The Sp., says it expects 80,000 passengers in cently rebuilt Lodz passenger terminal, European Union has now tightened up the 2016, the first full year of operation, and where passenger numbers in 2013 fell al- rules on state aid that airports can receive. about 250,000 passengers a year by 2035. most one million short of forecasts, accord- Krawczyk, who was not directly involved It is in a sparsely populated corner of north- ing to European Commission documents in planning any of the airport investments, east Poland. The nearest big population centre, examined by Reuters. said that in those Polish cases where things Olsztyn, with 175,000 people, is a one-hour On a relatively busy day this summer, did go wrong, “there was no corruption, just drive away along narrow bumpy roads that are just four flights arrived and four departed. wrong priorities.” clogged with traffic in summer. In between, the place was almost deserted. “That part of Poland needs an airport, FAULTY FORECASTS In the early afternoon a single passenger, a but not there,” said Jacek Krawczyk, a former woman in a blue-and-white striped T-shirt, Between 2007 and 2013, the European chairman of Polish airline LOT who has a sat in a 72-seat waiting area. Outside on Union promised funding to help build senior role at the European Economic and the tarmac, five sets of movable steps stood and upgrade 12 Polish airports. Some of Social Committee, which advises the European waiting for a jet to land. the projections underlying the plans were Commission. “It’s a complete mistake.” Where there aren’t enough passengers highly ambitious. The airport said it was in talks with low- to make an airport viable, local govern- The government declined to detail its cost carriers, and had provisional agreements ments keep them on life support through predictions for passenger numbers. But with two Polish regional airlines, and subsidies, according to a report by CEE figures for three of the airports – Lodz, SprintAir. It said work was underway to make Bankwatch Network, a non-governmental Rzeszow and – are contained in let- the airport more accessible. It expects to start watchdog. The beneficiaries have often ters on a related topic sent by the European making a profit from around 2020. been the airlines that use them. Commission to the Polish foreign minister. Reporting by Wiktor Szary and Christian Lowe

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The letters show Polish authorities pro- Funding for airports jected combined passenger numbers for the airports to be more than 3 million passen- EU funds by member state, 2007-2013* gers a year. In 2013, the actual number was € MILLION 0500 just over 1.1 million (See chart). Together, the investments in the three Poland 615.8 airports totalled about 245 million euros. Spain Around 105 million of that came from the Romania European Union. The rest came from cen- Between 2007 and 2013, the European Union tral government in , local govern- Czech Rep. promised funding to help build and upgrade ments and the airports themselves. Greece 12 Polish airports. The airport with the biggest projected traffic was in Lodz. In that period Poland received 615.8 million In its heyday, the city was a thriving tex- Portugal euros in EU support for airports, almost twice tile manufacturing centre. Now, many of as much as the next biggest recipient, Spain, the elegant 19th-century merchant’s hous- UK and more than a third of all member states’ es lining the main drag, Piotrkowska Street, Slovenia money for airports. are crumbling. Jerzy Kropiwnicki, mayor of Lodz be- Sweden tween 2002 and 2010, wanted to attract *Source: European Commission foreign investment and tourists. The city had a small airport that handled domestic flights; but Kropiwnicki felt a big inter- Expansion of three Polish airports national terminal would revive the local economy. Polish authorities projected combined passenger numbers for three “I used to endlessly answer questions Polish airports to be almost 3 million in 2013, three times higher than like: ‘How do we get to you?’ and ‘How do the actual number. we fly there?’” Kropiwnicki told Reuters. 1.4 PASSENGERS IN 2013 Poland, which had joined the European IN MILLIONS 1.0 Union in 2004, was gearing up for a mas- 0.7 Forecast passengers sive injection of EU cash to be spent on 0.6 0.4 development projects between 2007 and 0.2 Actual passengers 2014. To get the funds, the country had to prepare a strategic plan for civil aviation. At Rzeszow Lublin COST the Transport Ministry, this task fell mainly € MILLION to Andrzej Korzeniowski. 30 30 EU funds He was given three months to draft 45 20 72 Polish funds the plan and meet the EU funding dead- 49 (local and central line. “I slept on a camping mattress under governments, airports) my desk,” Korzeniowski, now retired, told Reuters. “I had no time to eat.” Looking back on the 160-page docu- ment he drafted, Korzeniowski says it Sources: airports; European Commission letters M. Ulmanu/Reuters Graphics was, under the circumstances, a good pro- gramme. But it had a big shortcoming: It let local governments decide where new airports should be built, and how big they would be. “That was the biggest mistake,

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for which we’re now paying the price,” he said. “The local governments decided, ‘I’m a prince in my domain, the government doesn’t tell me what I’m supposed to do, we do what we want.’” By 2005, passenger numbers in Lodz were shooting up. Wojciech Laszkiewicz, an adviser to the mayor who went on to be deputy chief executive of the airport, said the team decided to rebuild the terminal entirely. The airport commissioned a feasibility study from advisory firm Ernst & Young (EY), published in November, 2009. EY predicted a minimum of 1.042 million passengers in 2013 for Lodz. That was less than the government forecast but many more than the 353,633 who actually passed through the airport last year. EY declined to comment. body that advises on EU decision-making. moment in Europe, they are often propped Lodz’s mayor, Kropiwnicki, left office In a statement, a spokesman for up through financial injections from local in 2010, two years before the new termi- the Ministry of Infrastructure and authorities, which are often their biggest nal opened. The aim of the airport was to Development said it could issue guide- shareholders. help stimulate the local economy, he said, lines, but could not directly influence local The state also has indirect methods of and it is achieving that. “From my point of authorities: “A decision on expanding or helping the airports, in particular by giv- view, the airport wasn’t supposed to make building an airport for a particular region ing money to the airlines – mainly low-cost a profit.” is the prerogative of the local authorities.” carriers like Ryanair. Under EU rules, though, the initial cash “In practice, these payments serve as an “CANNIBALISATION” for airports comes from national govern- incentive for airlines,” CEE Bankwatch The problem, say aviation industry officials ments. They are reimbursed by the EU Network, the non-governmental watchdog, and consultants, is that passenger numbers when it approves a scheme. said in its report. for any individual airport are impossible to Only investments worth over 50 million Lodz and Rzeszow airports did not predict with confidence. Even if national euros have to seek the Commission’s prior respond to questions about how much forecasts hold true, local factors can pull approval, and many of the Polish airport they pay airlines. A spokesman for Lublin passengers away from one airport and at- investments were below that threshold. The airport said only that it was successfully tract them to another. Commission has since said its approach to boosting communications to help the local Lodz quickly became a victim of this funding the airports will undergo a radical economy. “cannibalisation,” as the airline industry change. In February, it introduced stricter But public records for Podkarpackie, calls it, because Warsaw airport was also criteria, and said loss-making airports will the mountainous, forested region where upgraded, and a new highway built which be forced to wean themselves off state aid. Rzeszow airport sits, show that between brought the capital within 50 minutes’ It did not name any countries. 2011 and 2014 its government paid 5.7 drive of Lodz. million euros to Ryanair in exchange for PAYMENTS TO AIRLINES “To have an airport in Lodz from that advertisements promoting the region, point of view makes no sense at all,” said For now, the Polish airports still need help, which appeared on Ryanair’s web site and Krawczyk, the former airline chairman. He and that can be expensiv e. Senior managers in its in-flight magazines. Podkarpackie is now president of the Employers’ Group in the Polish aviation industry said the cost spent another 3 million euros to advertise of the European Economic and Social of running a small regional airport would with Polish carrier Eurolot over a three- Committee, a Brussels-based consultative be at least 3 million euros a year. At the year period.

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In all, 70 percent of the region’s 2013 2010. A Eurolot spokeswoman said such what Rzeszow is famous for, but it’s famous promotional budget went to airlines that marketing deals were widely used in the for something.” fly into Rzeszow airport. aviation business in Europe. She said the These payments are problematic, say airline provided marketing exposure for the Additional reporting by Robert Hetz in Madrid several people involved in Polish aviation, region, for example by painting its jets in and Rene Wagner in Berlin; Edited by Sara because the airports are at the mercy of the the region’s colours. Ledwith airlines. With so many airports to choose Ryanair chief executive Michael from, airlines can easily shift routes. O’Leary told Reuters such advertising was “The relationship between the local air- a good deal for local governments because FOR MORE INFORMATION ports and low-cost carriers is suicidal,” said the Ryanair website reached a huge audi- Christian Lowe Krawczyk, the former airline chairman. For ence. He said Ryanair brought economic [email protected] low-cost carriers, he said, “nothing will ever benefits to places that are off the beaten Wiktor Szary be enough. ... At some point they will say, track, in part by flying in tourists. But “if [email protected] ‘If you don’t give us more, we’ll go.’ And the airport doesn’t want me, that’s fine. I’ve Christian Lowe, Bureau Chief, Central they go.” 80 other airports in Europe who want the Europe and the Balkans A spokesman for the region where growth. We don’t force any airports” to pay. [email protected] Rzeszow is located said the deals were good “If Rzeszow has enough low fares, Sara Ledwith, Assistant Enterprise Editor value because they allowed it to target the Rzeszow can grow to 1 million visitors, 5 [email protected] kind of travellers it wants. He said tourist million visitors, 10 million visitors,” said Michael Williams, Global Enterprise Editor numbers in 2013 were double the level in O’Leary. “They provide – well, I don’t know [email protected]

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