THE GOVERNMENT yesterday dismissed claims by construction giant J&P that the terms of an agreement the state is negotiating with an international consortium for the island’s two airports will make them among the five most expensive in Europe.
In a written statement, the Transport Ministry said the claims by J&P, which has a 60 per cent stake in a rival consortium, Cyprus Airports Group (CAG), that came third in the initial bids for the £200 million Build Operate Transfer (BOT) contract, were “inaccurate and exaggerated”.
“It is obvious that these statements were made to create problems in the developing negotiations,” the Ministry said.
The government has been negotiating with second bidder Hermes Consortium since late last year and was believed to be close to a deal, and that it may be signed this month. Negotiations with preferred bidder Alterra consortium fell through in the middle of 2004.
Its bid included an offer to return to the Cyprus government 48.96 per cent annual gross turnover in royalties under contract, compared to 33 per cent offered by the Hermes and 20.21 per cent promised by the CAG, which, includes British airport authority BAA with 15 per cent interest.
CAG, which is challenging the government on the tenders procedure at the Supreme Court say that due diligence was not given to the terms of the tender. It was requesting that the tenders documents be made public and has just now secured approval for the move.
Reports yesterday said the Ministry was alarmed over the news and held an emergency meeting, worried that further legal action would delay the already-overdue start of construction.
In statements issues on Thursday CAG said that according to their assessment, carried out with PriceWaterhouseCoopers, due diligence was not given to the terms of the tender and that the expected income from the operation and management of the airports was calculated arbitrarily.
The consortium said that in order for Hermes to achieve its promise of returning 33 per cent to the government it would be necessary to increase airport charges and levies by 50 per cent, which would seriously affect the competitiveness of the tourist industry.
Among the levies affected would be passenger taxes, fuel taxes for airlines, including the already cash-strapped Cyprus Airways, catering, handling fees, fire services, and rents, which could even double, CAG said.
“This would result in a significant drop in the number of arrivals or even an increased probability of the use of Tymbou airport by foreign companies,” the CAG statement said.
The government has said several times in the past that passengers taxes and some other levies have been fixed by parliament and that no increase in these charges is foreseen when the airports come under new administration.
The BOT project is already over a year behind schedule and construction is nowhere near starting until the government manages to reach a deal.
