Against the wind

The government's plan for new airports has at last made some headway. Niveen Wahish reports
Despite a slew of reports on the damage suffered by tourism and the airline industry since 11 September, some investors are still holding steady. Last week, the Marsa Alam International (MAI) airport, which will serve tourists in the South Red Sea area, went operational.
Three years in the making, the airport has been launched with an initial investment of $50 million, paid by Kuwait- based M.A Kharafi Group, which has also been awarded a 40-year concession for the airport. Netherlands Airport Consultants were the designers, and the airport will be operated by Aéroport de Paris. The airport is part of a larger development project designed to create a state-of-the-art resort area in Port Ghaleb, just off Marsa Alam.
Although the inauguration of the airport was originally scheduled for 1 October, it was delayed by cancellations stemming from the 11 September terror attacks. Now the airport is open, the Kharafi Group expects weekly flights until April with scheduled flights by Condor Flug, Crossair, and Aeroloyd.
Traffic at the airport is then expected to grow as the surrounding area develops. Jim Pringle, chief executive director for Kharafi Group in Marsa Alam, is optimistic, notwithstanding the 11 September slowdown . "By the end of 2002, we expect to receive two aircraft a day; by 2004 we expect this to climb to four aircraft a day. By 2010 we forecast nine flights a day, with steady growth thereafter. By the end of our 40-year concession period we are forecasting 40 flights per day."
The Port Ghalib resort, which will also include a marina and a port, is due to be completed by 2004. But the airport will not be idle in the meantime. Pringle says the airport will serve a "catchment area" on the South Red Sea that includes hotels and resorts stretching from Quesir to Marsa Alam City. This area already boasts around 2,000 hotel rooms. Moreover, "we see land purchases, development plans and commitments, and actual construction work, that conservatively suggest 4,000 rooms by 2004," Pringle adds.
But there is more of note to the new airport than merely the defiance of its investors in the face of economic hardship. Marsa Alam is Egypt's first airport to be built from scratch by a private company under the Build-Operate-Transfer (BOT) system ushered in by law 3. That law, issued in 1997, allows private firms to establish, operate and manage airports for a period of up to 99 years.
Under the terms of Kharafi Group's concession, the Egyptian Civil Aviation Supervisory Authority will oversee Marsa Alam airport's operations. Ultimate title to the airport will remain with the government.
Nagi Samuel, chairman of the Egyptian Airport Company, (which runs the tendering process for new airports on behalf of the government), explained that existing airports, which are already in operation, are allowed a 25-year concession period, while airports built from scratch are allowed a concession of between 40 and 50 years. The length of the concession also depends on the difficulty of the location, explained Samuel. "Airports cost a lot to build and the investor needs time to make a return on their investment."
The government aims to make the most of Egypt's existing resources, while developing new tourist assets such as health resorts. Along with land for the airport, investors are granted an additional plot for development, Samuel explained. The government still owns the land; the investor is merely given the right to use it for development purposes. The government also gets a percentage of any revenue.
Yet there has hardly been a private sector stampede. Since law 3 came into effect, the government has been keen to attract private capital to pay for the construction and renovation of around 26 of Egypt's airports. Yet so far, its efforts have met little success. Samuel observes that only four other airports have been commissioned so far: Alamein, Farafra, Bahriya, and a new terminal at Sharm El- Sheikh airport.
Samuel attributes tepid private sector enthusiasm to poor marketing. He feels there is a lack of publicity, and that the government's vision has not been properly promoted.
Samuel feels that making faster progress is urgent. Not only can the new airports develop communities and create employment, but they will also help ease the pressure on existing airports. Assiut airport, says Samuel, which is on the government's list of airports awaiting tender, will be used for regular flights, letting tourists fly home without needing to return to Cairo. Similarly, Borg El-Arab airport, Samuel explained, will eventually replace Alexandria's Nozha airport.
Others, though, do not blame poor advertising for private sector reserve. Sahar Tohamy, researcher at the Egyptian Centre of Economic Studies, recently helped prepare a study on private sector involvement in Egypt's airports. In the study, Tohamy commented that a law, devised specifically to suit investment in airports, was needed to attract private firms. "Such a law is needed so investors can evaluate projects with assurance," she stressed. If investment terms are not outlined clearly, there is a danger that only risk-taking entrepreneurs will take up airport projects. And they will charge high premiums. Nor does Tohamy feel that BOT is the only approach the government can take. Tohamy points to different ways to involve the private sector, such as operation and management contracts.
Given these doubts and difficulties, the inauguration of the new airport is quite a fillip for the government and its plans. But the hesitancy of private capital to get involved in other airports remains worrying. It now remains to be seen whether Marsa Alam is the start of grander private involvement in Egypt's airports, or is merely a bright spot in an outlook otherwise bleak.
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