The European Union has given
Poland more than 100 million euros ($125 million) to build at least
three "ghost" airports in places where there are not enough passengers
to keep them in business.
The
result is gleaming new airport terminals which, even at the peak of the
holiday season, echo to the sound of empty concourses and spend
millions trying to attract airlines.
Poland is not the only country in Europe to have built airports that
struggle to attract flights. Around 80 airports in Europe attract fewer
than 1 million passengers a year, and about three-quarters of those are
in the red, according to industry body Airports Council International.
Some cost much more to build than the Polish projects. One airport in
eastern Spain, open for three years, has so far received not a single
flight.
But Poland is striking because the country received so much money for its projects from EU funds.
Poland received 615.7 million euros in EU support for airports between
2007 and 2013, according to figures supplied to Reuters by the European
Commission. That was almost twice as much as the next biggest recipient,
Spain, and more than a third of all member states’ money for airports.
The government declined to provide all the information on which it based
its decisions to invest in the airports, but Reuters has reviewed data
on three sites where traffic fell dramatically short of forecasts.
Poland is often touted by
Brussels as one of the most efficient users of EU aid, and there is no
suggestion the country used EU airport money corruptly. European help
has been vital in improving Poland's aviation infrastructure, only a
small share of the country’s airport spending has been on white
elephants, and passenger shortfalls may have been exacerbated by the
2008 global financial crisis. Spokespeople at some airports said the
projects could be considered a success because they were creating jobs,
bringing in tourists, and driving investment in the regional economy.
But it is clear mistakes were made in Poland, planning officials and
aviation executives say. The whole experience raises questions about how
the government will handle the next big injection of EU money, which it
expects to be 82 billion euros over the next seven years.
The problem is most striking at the recently rebuilt Lodz passenger
terminal, where passenger numbers in 2013 fell almost one million short
of forecasts, according to European Commission documents examined by
Reuters.
On a relatively busy day this
summer, just four flights arrived and four departed. In between, the
place was almost deserted. In the early afternoon a single passenger, a
woman in a blue-and-white striped T-shirt, sat in a 72-seat waiting
area. Outside on the tarmac, five sets of movable steps stood waiting
for a jet to land.
Where
there aren’t enough passengers to make an airport viable, local
governments keep them on life support through subsidies, according to a
report by CEE Bankwatch Network, a non-governmental watchdog. The
beneficiaries have often been the airlines that use them.
Jacek Krawczyk, the former
chairman of the board of Polish national airline LOT who sometimes
advises the European Commission on aviation policy, said Poland was no
worse than other EU countries at building airports, but the sheer volume
of EU money it was trying to absorb in a short space of time explained
some problems. The European Union has now tightened up the rules on
state aid that airports can receive.
Krawczyk, who was not directly involved in planning any of the airport
investments, said that in those Polish cases where things did go wrong,
“there was no corruption, just wrong priorities.”
FAULTY FORECASTS
Between 2007 and 2013, the European Union promised funding to help
build and upgrade 12 Polish airports. Some of the projections underlying
the plans were highly ambitious.
The government declined to detail its predictions for passenger
numbers. But figures for three of the airports – Lodz, Rzeszow and
Lublin – are contained in letters on a related topic sent by the
European Commission to the Polish foreign minister. The letters show
Polish authorities projected combined passenger numbers for the airports
to be more than 3 million passengers a year. In 2013, the actual number
was just over 1.1 million.
Together, the investments in the
three airports totaled about 245 million euros. Around 105 million of
that came from the European Union. The rest came from central government
in Warsaw, local governments and the airports themselves.
The airport with the biggest projected traffic was in Lodz.
In its heyday, the city was a thriving textile manufacturing center.
Now, many of the elegant 19th-century merchant’s houses lining the main
drag, Piotrkowska Street, are crumbling.
Jerzy Kropiwnicki, mayor of Lodz between 2002 and 2010, wanted to
attract foreign investment and tourists. The city had a small airport
that handled domestic flights; but Kropiwnicki felt a big international
terminal would revive the local economy.
"I used to endlessly answer questions like: 'How do we get to you?' and 'How do we fly there?'" Kropiwnicki told Reuters.
Poland, which had joined the
European Union in 2004, was gearing up for a massive injection of EU
cash to be spent on development projects between 2007 and 2014. To get
the funds, the country had to prepare a strategic plan for civil
aviation. At the Transport Ministry, this task fell mainly to Andrzej
Korzeniowski.
He was given
three months to draft the plan and meet the EU funding deadline. “I
slept on a camping mattress under my desk," Korzeniowski, now retired,
told Reuters. "I had no time to eat."
Looking back on the 160-page document he drafted, Korzeniowski says it
was, under the circumstances, a good program. 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, 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.
Lodz’s mayor, Kropiwnicki, left
office in 2010, two years before the new terminal opened. The aim of
the airport was to help stimulate the local economy, he said, and it is
achieving that. "From my point of view, the airport wasn't supposed to
make a profit."
“CANNIBALIZATION”
The problem, say aviation industry officials and consultants, is that
passenger numbers for any individual airport are impossible to predict
with confidence. Even if national forecasts hold true, local factors can
pull passengers away from one airport and attract them to another.
Lodz quickly became a victim of this "cannibalization,” as the airline
industry calls it, because Warsaw airport was also upgraded, and a new
highway built which brought the capital within 50 minutes’ drive of
Lodz.
“To have an airport in Lodz from that point of view makes no sense at
all," said Krawczyk, the former airline chairman. He is now president of
the Employers’ Group of the European Economic and Social Committee, a
Brussels-based consultative body that advises on EU decision-making.
In a statement, a spokesman for
the Ministry of Infrastructure and Development said it could issue
guidelines, but could not directly influence local authorities: "A
decision on expanding or building an airport for a particular region is
the prerogative of the local authorities."
Under EU rules, though, the initial cash for airports comes from
national governments. They are reimbursed by the EU when it approves a
scheme.
Only investments
worth over 50 million euros have to seek the Commission’s prior
approval, and many of the Polish airport investments were below that
threshold. The Commission has since said its approach to funding the
airports will undergo a radical change. In February, it introduced
stricter criteria, and said loss-making airports will be forced to wean
themselves off state aid. It did not name any countries.
PAYMENTS TO AIRLINES
For now, the Polish airports still need help, and that can be
expensive. Senior managers in the Polish aviation industry said the cost
of running a small regional airport would be at least 3 million euros a
year. At the moment in Europe, they are often propped up through
financial injections from local authorities, which are often their
biggest shareholders.
The state also has indirect
methods of helping the airports, in particular by giving money to the
airlines – mainly low-cost carriers like Ryanair.
"In practice, these payments serve as an incentive for airlines," CEE
Bankwatch Network, the non-governmental watchdog, said in its report.
Lodz and Rzeszow airports did not respond to questions about how much
they pay airlines. A spokesman for Lublin airport said only that it was
successfully boosting communications to help the local economy.
But public records for Podkarpackie, the mountainous, forested region
where Rzeszow airport sits, show that between 2011 and 2014 its
government paid 5.7 million euros to Ryanair in exchange for
advertisements promoting the region, which appeared on Ryanair’s web
site and in its in-flight magazines. Podkarpackie spent another 3
million euros to advertise with Polish carrier Eurolot over a three-year
period.
In all, 70 percent of the region’s 2013 promotional budget went to airlines that fly into Rzeszow airport.
These payments are problematic,
say several people involved in Polish aviation, because the airports are
at the mercy of the airlines. With so many airports to choose from,
airlines can easily shift routes.
“The relationship between the local airports and low-cost carriers is
suicidal,” said Krawczyk, the former airline chairman. For low-cost
carriers, he said, “nothing will ever be enough. ... At some point they
will say, ‘If you don’t give us more, we’ll go.’ And they go.”
A spokesman for the region where Rzeszow is located said the deals were
good value because they allowed it to target the kind of travelers it
wants. He said tourist numbers in 2013 were double the level in 2010. A
Eurolot spokeswoman said such marketing deals were widely used in the
aviation business in Europe. She said the airline provided marketing
exposure for the region, for example by painting its jets in the
region’s colors.
Ryanair
chief executive Michael O'Leary told Reuters such advertising was a good
deal for local governments because the Ryanair website reached a huge
audience. He said Ryanair brought economic benefits to places that are
off the beaten track, in part by flying in tourists. But “if the airport
doesn’t want me, that’s fine. I’ve 80 other airports in Europe who want
the growth. We don’t force any airports" to pay.
"If Rzeszow has enough low
fares, Rzeszow can grow to 1 million visitors, 5 million visitors, 10
million visitors,” said O’Leary. “They provide – well, I don’t know what
Rzeszow is famous for, but it's famous for something."
(Additional reporting by Robert Hetz in Madrid and Rene Wagner in Berlin; Edited by Sara Ledwith) (Source: http://news.yahoo.com /special-report-eu-funds-help-poland-build-ghost-082335225.html)