NEXT SUNDAY’S increase in airport charges will be discussed today at a special sitting of the House Commerce Committee following uproar yesterday from all factions in the tourist industry.
Hoteliers, travel agents, the Cyprus Tourism Organisation (CTO), deputies and even the Consumers’ Association were up in arms over the £6 levy, which represents a 47 per cent increase.
The new charge, imposed by private airport operator Hermes, is for travel after April 1 and is to be followed by two more later this year.
The July and November increases will result in a hike of 70 per cent in the charges that are added to fares.
Both hoteliers organisations STEK and PASYXE issued a statement saying the move would seriously affect the competitiveness of the Cyprus tourism product. They described it as a calamity and said no increases should be imposed until the new airport is built and operational in 2009, and when services would be improved.
“We call the government to intervene and take into consideration the best interests of tourist industry,” they said. Hoteliers want the government to consider reducing its 33 per cent annual return from Hermes so that charges can be lowered.
Outrage also emanated from travel agents who said they have been stung by the increase because it did not appear on computer systems until late last week, which meant anyone travelling after April 1 who had already paid for their tickets could not be charged the new levy.
Thassos Katsourides, the general manager of the Association of Cyprus Travel Agents, who had already spoken to the Sunday Mail about the issue, said yesterday that although they knew an increase was in the pipeline, they had not been properly informed of the calculations.
“We didn’t know,” he said. “We didn’t know until it appeared on the system.”
CTO chairman Panos Engelzos called it a “bomb” to the tourist industry and Consumers’ Association president Petros Markou complained that the public had not been warned in advance.
Deputies, DISY’s Lefteris Christoforou and AKEL’s Yiannos Lamaris both commented on the issue yesterday.
Christoforou said the consequences on the tourism industry and the consumer would be “incalculable”. He said the government had signed a one-sided agreement “at the expense of the public and a strategic sector of the economy”.
Lamaris however blamed DISY because the party had got the ball rolling on handing over the operation of the airport to a private investor under the Clerides government. “DISY sewed the suit and now we are called to pay,” he said.
However the deal with Hermes was not signed until 2006, three years after the current government came to power.
Communications and Works Minister Harris Thrassou yesterday rubbished all parties’ complaints, saying Hermes had announced that there would be increases last June, not only due to the operation of the new airports but also the existing ones.
“It was predetermined in the specifications for the offer that the strategic investor could impose an increase in charges,” Thrassou said.
He said the government could not intervene and was obliged to respect the agreements and there was no way to persuade Hermes to reduce the charges.
J&P: we told you this would happen
IRONICALLY it was the losing bidder from the original three short-listed from the 600-million euro Build-Operate-Transfer (BOT) that first forecast unprecedented increases in airport charges three years ago.
In 2004 when the government was negotiating with first-choice Alterra, Cypriot construction firm Joannou & Paraskevaides (J&P), which had a 60 per cent stake in the Cyprus Airports Group (CAG) consortium that came third in the bidding, said the government was so blinded by the high returns on offer that it failed adequately to assess the tenders.
Alterra’s 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 plus an additional 3.5 million euros every year offered by Hermes, and only 20.21 per cent promised by the CAG,
The J&P/CAG bid came first in the technical competition – Alterra came third in that area – but this accounted for only 30 per cent of the tenders’ evaluation while the revenue return offer comprised 65 per cent of the total marks, with another five per cent given to other considerations.
Because of its low 20.21 per cent offer to the government, coupled with a clause in the tenders’ criteria, the J&P-led consortium was specifically excluded from opening any negotiations with the government in the event that talks with the other two bidders fell through.
When negotiations with Alterra did fall through in mid-2004, the government turned to Hermes.
But J&P had questioned whether the airports could be viable with royalties as high as 49 or 33 per cent unless the state had been willing to give its consent to huge increases in levies on passengers and services, with the inevitable impact on tourism, the national carrier and the economy.
The government dismissed claims by J&P that the terms of an agreement the state was negotiating would make them among the five most expensive in Europe.
J&P said that 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.
Hermes says it has no choice but to increase charges since it is attempting to improve an existing service while at the same time raising cash to build the new airports.
At a recent conference, Hermes CEO Bob Manning told delegates that the drop in tourism and a slow rate of passenger growth was worrying.
Manning said that if numbers did not pick up soon, there would be a real problem and that passenger growth in the last six years had been negligible.
He said the charges at the moment were the direct result of the conditions of the airport as they stand.
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