Flight Delays

Economic News

22 Jul 2010
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The concession contracts for two Black Sea airports are up for grabs again, after Bulgaria's top judges reversed a previous decision awarding the contract to Denmark's Copenhagen Airports.

Now that the Supreme Administrative Court (SAC) has overturned the previous ruling, the bids of two other candidates for the 35-year concession contracts to manage the Varna and Burgas airports will be reconsidered.

Fraport AG Frankfurt Airport Services Worldwide, in partnership with Bulgaria's BM Star EOOD, and Vinci Airports-Vinci Concessions were second and third behind Copenhagen when the contract was originally awarded last year.

According to the court's ruling, the Copenhagen Airports bid was disqualified because it did not meet the criteria specified in the bidding process. Specifically, the court said that Copenhagen Airports did not have at least two years of experience in running at least two airports. The SAC also said the Danish had missed the deadline for the submission of the tender documents.

"We have decided to continue the procedure with the other bidders," Bulgarian Transportation Minister Petar Mutafchiev told reporters. "But we have to check once again whether they were eligible to bid in the tender."

Mutafchiev indicated that a committee would be formed to determine if Fraport and Vinci were lawfully admitted to the concession procedure and if so, who the winner will be.

The Varna and Burgas airports are crucial to the Bulgarian tourism industry, which depends heavily on international clientele flocking to Black Sea resorts during the summer holiday season.

From 2000 to 2004, foreign nationals visiting Bulgaria for tourism increased from 2,354,052 to 4,010,326, according to the Ministry of Economy and Energy.

Holidaymakers from Greece were the most prolific tourists to vacation in the country during that period, with 707,453 visits. The Greeks were followed closely by Macedonians (655,974), travellers from Serbia and Montenegro (576,965), Germans (565,337), and British (256,092) rounding out the top five.

Of these visitors, the Bulgarian Tourist Chamber figures show that 87% of them head for the coast and account for three-quarters of the country's hotel revenue.

Because over two-thirds of all foreign tourists seek out beach holidays, Bulgaria faces stiff competition from other internationally known vacation destinations. But the country has so far been able to capitalise on its close proximity to western Europe and, more importantly, with relatively inexpensive prices. Although costs are on the rise, Bulgaria remains much cheaper than many of its more well-know competitors.

In recent years, hotels and villas have sprung up along the coast at a phenomenal rate and still more are on the way. Other industries catering to tourists are also thriving, with nightclubs, bowling alleys, yacht clubs, horse-riding stables, tennis courts, swimming pools, squash courts and mini-sport complexes all available, with new golf courses on the way.

Tourist arrivals have been increasing on average of 14% per year over the last five years, and so many airlines are looking to capitalise on the trend.

One low-budget airline, Wizz Air, recently announced that it would begin direct flights between Burgas and London three times a week starting in May. More budget airlines are expected to compete in this market as the number of British tourists travelling to Bulgaria reaches an estimated 1.2m by 2008. Many other airlines, including British Airways, already offer direct services from locations all over Europe.

The steady increase in tourists, combined with the lack of viable transportation alternatives to the coastal resorts, mean that the successful management, modernisation and expansion of coastal airports are a priorities for the Bulgarian tourism industry. But according to Copenhagen Airports, the Burgas and Varna airports' outdated equipment could force passengers to be diverted if urgently needed upgrades are not performed.

Copenhagen Airports had planned to invest 25m euros ($30.18m) during the first year of the contract and an additional 140m euros ($168.98m) over the following three years. The Danish company is currently set to enter into further negotiations with the Transportation Ministry on the matter.

Fraport AG Frankfurt Airport Services Worldwide, which was ranked second in the bidding procedure and appealed the decision to award the contract to Copenhagen, said it is also ready to start negotiations immediately. The German company has offered to invest a total of 403m euros ($486.46m) in the two airports.

The intense bidding competition between international companies jockeying for position to win the prized airport concession has underscored the importance and potential of Bulgaria's burgeoning Black Sea region as a increasingly popular vacation destination. When the dust clears and the contract is awarded - once again - the eventual winner will be in control of two of Bulgaria's most critical tourist hubs for the next 35 years.

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