Filenews 27 October 2024 - by Eleftheria Paizanou
The number of passengers at Larnaka and Pafos airports will exceed 12 million this year, recording an increase of 5% from 2023 and 8.4% compared to 2019, the year in which high performance in passenger traffic was recorded.
The increase in passenger traffic is attributed to incentive plans to enhance Cyprus' connectivity. The projects are co-financed by the Ministry of Transport and Hermes Airports Ltd, which is the managing company at Larnaka and Pafos airports.
The aim of the plans is to enhance connectivity and tourism in Cyprus, to adequately address international competition and risks associated with the possibility of an additional increase in international energy prices, to contain the impact of inflationary pressures and the unstable political landscape, so that the aviation sector can recover and strengthen.
2024 is estimated to record the highest passenger traffic in Cyprus, with the estimated number of passengers reaching 12.2 million. In detail, compared to last year, traffic is increased by 600,000 passengers. Compared to 2019, passenger growth exceeded 950,000.
For this year, there are estimates that passenger traffic at Larnaka airport will be 8.6 million passengers, recording an increase of 6.6% compared to last year.
For Pafos airport there are estimates that traffic will be 3.6 million. passengers, which is 1.3% more than in 2023.
According to data from the Ministry of Transport, the increase in passenger traffic and availability of air seats is due to the increase in connectivity on which the incentive plans have had a decisive effect.
For the period 2023 to 2027, the cost for these projects is estimated at €165 million. Last year, the Republic paid €17 million for the implementation of these plans for the period November 2023 – October 2024, which had a net benefit of approximately €8 million.
The implementation of these plans satisfies the strategic objectives of the Republic to expand tourist traffic, increase Cyprus' connectivity, develop sustainable tourism and improve economic activity.
Further increase in posts
The incentive plans during the period November 2024 to March 2025 will help increase airline seats. It is estimated that the increase will be of the order of 35% compared to airline seats in 2023.
According to data from the Ministry of Transport, the incentive plans resulted in the connectivity of Cyprus with 38 countries, through 55 airlines. At the same time, there were 156 routes in 2024, compared to 153 last year and 147 in 2022. An increase in revenues for 2024 is also expected from the concession fee paid by Hermes to the state.
Revenues will exceed €81 million, an increase of 39% compared to 2023 through the airport concession agreement. Since 2006, when the management of Larnaka and Pafos airports was handed over to the managing company, the state has received an amount of €950 million. from the concession fee, while next year there are estimates that revenues will increase further.
What do the incentive plans envisage?
Incentive schemes for airlines have been in place since 2012. In September 2022, the previous Government had decided to suspend the incentive plans, in protest against the objections of the Audit Office to the consultations held by the then Government with Hermes for a possible extension of the management of airports for another 5.5 years, without a call for tenders, in order for the company to execute the works of the second phase of the airports, as provided for in the original convention and the wide.
Following reactions from the tourism industry, the Council of Ministers approved new incentive schemes for the period 2023 – 2027. These plans were a continuation of the plans implemented in the period 2012-2022, which had been a dynamic and necessary tool in the efforts to develop the country's air connectivity and had as its primary objective the development of new routes and the increase of passenger traffic.
During that period, 113 new routes had been developed, passenger traffic increased from 7.3 million. passengers in 2011 to 11.3 million. in 2019, with an additional €67 million. revenues to the State, through the concession contract.
Based on the latest incentive schemes, the participation of the Republic of Cyprus in the cost of the project is 49%, while that of Hermes Airports Ltd is 51%, percentages which amount to 27% and 73% respectively, since the operator continues to pay the concession fee of 32.38%.
As the Ministries of Finance and Transport had argued when the new incentive plans were decided, the aim was to further improve the country's air connectivity by developing new routes, maintaining and deepening existing ones, extending the tourist season, but also recovering air transport from the effects of the pandemic, the war in Ukraine and the challenges faced by air transport in today's competitive and changing environment.
At the same time, they had argued that while competing airports were implementing similar incentive plans, the non-implementation of an incentive plan by the airports of the Republic would lead to a significant loss of airlines, passengers and net revenues for the state and the economy in general.
The new deal for airports
In the meantime, the agreement between the state and Hermes Airports for the second phase of infrastructure works at Larnaka and Pafos airports and for the extension of the concession agreement of the two airports to the company is expected to be signed soon. As you know, the consultations held under the previous government were the reason for the suspension of incentive plans. The Central Committee for Changes and Claims (KEEA) gave the green light to formalize the agreement. The positions of the Commissioner for State Aid Control Stella Michaelides, who does not identify state aid issues, are expected soon. The new agreement provides for:
- Extension of the airport concession contract for another 18 months, from the day the first agreement is completed, on May 31, 2031. That is, Hermes Airports will continue to manage Larnaka and Pafos airports until December 2032, instead of until November 2036 which was the original proposal.
- Granting compensation to the company amounting to €30 million, with the withdrawal of its claims from the state, which reached €400 million. At the same time, based on the new agreement, Hermes waives all claims that included, inter alia, compensation for changes in the business environment caused by new taxes and legislation, as well as by affecting the operation of airports due to the pandemic and the war in Ukraine and the operation of a competing -illegal- airport in the occupied areas.
- The agreement also includes the waiver of claims for the above, submitted for the period from 2022 to 2024.
- Non-payment of compensation by the state, in the future, to the managing company, due to the operation of the illegal airport of Tymbou.
- The construction of the second phase infrastructure works at the two airports is also planned.
