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12° Nicosia,
07 November, 2024
 
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Larnaca and Paphos airports to handle 17.5 million passengers annually

State moves forward with sustainable energy and security enhancements for airports

Dorita Yiannakou

The deal to hand over Larnaca and Paphos airports to Hermes Airports Ltd is nearly sealed, as the company moves toward securing financing from a banking institution for the second phase of development at both airports. According to information obtained by Kathimerini, Hermes Airports is in advanced talks with a bank to secure a loan for the project, pending approval from the Central Committee for Changes and Claims (CCCC), which will give the final go-ahead on the agreement.

Government sources suggest that, at this stage, no issues have been identified in the agreement, with the CCCC expected to give the green light by March 2025. This will effectively mark the start of the second phase of development managed by Hermes Airports. The government has also consulted the State Aid Control Commissioner to address any concerns about potential state aid related to contract changes. The Commissioner is expected to issue a position on this matter to the Ministry of Transport, Communications, and Works, enabling the finalization of the deal. Sources further indicate that the updated agreement, reached in August, includes two key amendments aimed at optimizing the phase-two planning in line with the original concession contract provisions.

The goal is to increase annual passenger capacity to 12.4 million at Larnaca Airport and 5 million at Paphos Airport, a roughly 70% boost over current capacities. The government sees this expansion as a significant achievement for its negotiation team. Without it, the current airport infrastructure, which is already nearing saturation, could struggle to manage passenger flow, resulting in delays and operational issues for airlines. Maintaining smooth passenger operations at Cyprus’s airports is also seen as crucial for a smooth transition to the next management entity, once Hermes’s tenure concludes.

Agreement Overview

Detailed negotiations began in September 2023, with a preliminary agreement reached to extend Hermes’s concession contract by 18 months beyond the initial end date of May 31, 2031. Specifically, the revised 2024 agreement calls for Hermes to begin development and operational improvements upon signing the financial agreement, rather than at a later date as stipulated in the 2022 contract. Under the updated terms, Hermes will continue managing Larnaca and Paphos airports until December 2032 instead of November 2036 as initially proposed. Additionally, the revised agreement requires Hermes to pay €30 million in compensation and to secure a €20 million loan from the variable concession fee to cover Cyprus’s costs. The updated deal also reduces the extension period from 5.5 years to 1.5 years, compared to the 2022 agreement. The government’s negotiating team, supported by legal, technical, and financial advisors, included representatives from the Ministries of Transport and Finance as well as the Legal Service, while Hermes’s team comprised company shareholders and management representatives.

Benefits and Infrastructure Investments

Under the agreement, Hermes will invest between €150 and €170 million in additional infrastructure, sufficient to meet the airports' needs until at least 2036. This investment will increase passenger-handling capacity by approximately 70%, improving the travel experience and service quality. Increased commercial activity within the expanded facilities is expected to generate additional revenue for Cyprus’s airports, create new jobs, and enhance stability and confidence for potential investors. Enhanced connectivity and competitiveness for Cyprus’s airports are also anticipated. Importantly, the 2024 agreement has been structured to ensure compliance with state aid regulations, confirming that no undue economic benefit is provided to Hermes.

Service Enhancements and Infrastructure Development

Low-cost airlines are expected to benefit from the new infrastructure upgrades, which will support their expanded role in bringing tourists to Cyprus, benefiting the national economy. Existing facilities for traditional carriers will be maintained. The expanded facilities will also include improved waiting areas, baggage handling, and check-in and security procedures, enhancing the passenger experience at both airports.

Timelines for Infrastructure Delivery

The development plan calls for Larnaca’s infrastructure upgrades to be completed in 30 months and Paphos’s in 27 months, with priority given to Paphos’s essential works. These projects are designed according to the latest standards to ensure sustainable development, incorporating renewable energy sources and electric vehicle infrastructure to reduce emissions. Additional infrastructure will also be implemented to bolster airport security.

For Paphos: expansion of security screening areas, commercial spaces, baggage management systems, new waiting lounges, and an extension of the southern taxiway.

For Larnaca: new passport and security check areas, additional waiting lounges, office and retail spaces, and extra aircraft parking areas.

Hermes Waives Claims Linked to Tymbou Airport and Other Factors

Under the new agreement, Hermes waives its right to seek compensation due to the operation of the unauthorized Tymbou airport—a long-standing request from the Cypriot government. Additionally, Hermes renounces other claims, including compensation related to recent tax and regulatory changes, impacts from the COVID-19 pandemic, and sanctions against Russia stemming from the Ukraine conflict.

These waived claims, which cover demands made between 2022 and 2024, collectively exceed €430 million.

 

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Cyprus  |  tourism

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