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Challenges for airports in Turkey

In the future Turkey is expected to see a propensity of travel. The country is perceived as an attractive touristic and business destination and in 2040 the Turkish market is expected to behave in the same way as the destinations Australia and Spain today. For this reason there is a need to expand Turkey’s airport infrastructure to ensure that business and leisure tourists can travel more easily.
Accordingly, the current growth and airport expansion was a central theme at the “2nd Airport Development & Expansion Summit” recently in Istanbul, Turkey. Experience shows that trip per capita is well correlated with GDP per capita at a high level. In 2040 Turkey will be able to achieve an average of 3 trips per capita per year, like Spain and Australia today. This mobility factor means that traffic at Turkish airports will reach approximately 550 million passengers by 2040. The fourfold increase in passenger traffic results from the future Turkish population growth which is expected to reach approximately 91 million inhabitants in 2040. The increasing numbers of passengers are bringing many airports to the edge of their capacity and will require further investment in the airport infrastructure. This presents great investment opportunities in a highly profitable growing business.


Ownership structure
The status quo lists that 11 of 50 Turkish airports are already implemented in public-private partnership (PPP) arrangements and are likely to be multiplied in the future. In order to cope with the forecasted developments, airports will need to invest in their infrastructure and especially in their passenger terminals.
More BOT (Build-Operate-Transfer) arrangement tenders can be expected in the near future in Turkey. BOT is widely implemented at Turkish airports as a way for the government to limit huge investments in infrastructures while keeping control and ownership of airports as strategic assets. BOT agreements are usually continued with a rental agreement. A PPP implies conflicting interests between the private and public sector that need to be addressed and managed. The public sector as the owner wants to achieve maximum benefit and prestige for the country for the local population and economy with a minimum investment. The private sector as the operator aims to achieve sustainable long-term results, minimum investment to meet requirements, most efficient use of infrastructure, unconstrained operation and state-of-the-art equipment.
However, it must be considered that PPP arrangements cause risk elements between public and private sector. Some risks at a minimum level are allocated to the government, like extended force majeure, delivery of public works or discriminatory change in law. More risks ensue for concessionaires, such as tax, commercial risk and financial risk.
Experience shows that financial stability as well as objective definition and political support are key factors for a successful privatization. Other significant factors are commercial focus, process integrity and appropriate advice.
Balancing of objectives in the PPP process is strongly recommended to ensure transparency of both parties. A third-party advisor as an objective party between public and private interest can be beneficial in financial, legal and technical areas. In addition a balancing of objectives avoids major discrepancies between planned development and actual development. Discrepancies can be due to unexpected external factors but also to a lack of know-how or experience. Risk can be mitigated by the use of third parties involved in the set-up of the PPP.


Operational use
The dual use, military as well as civil use, concerns 17 Turkish airports out of 49 operating airports. Several challenges have to be addressed to efficiently operate dual-purpose airports in Turkey.
Key domains for jointly used airports represent air traffic management and dealing with limitations in airspace capacity, airfield area capacity, slot adherence during peak periods and civil-military coordination. Furthermore, the airfield infrastructure and facilities contain joint use of runway and taxiways, preventive and corrective maintenance, aircraft fire-fighting and rescue services, and civil and military aviation security requirements. Considerations of the environmental impact means airport noise level reductions, operational restrictions due to night curfews and aircraft fire-fighting and rescue services.
However, challenges can be turned into advantages by establishing a true partnership among all involved parties to the benefit of everybody. By using success factors for a joint-use of airport infrastructure benefits for both parties can ensue, such as better use of assets and lower costs for both parties as fixed costs are shared.
Success factors which should not be disregarded are balanced governance structure between military and civil management, reliable civil operating/opening hours, landside separation of infrastructure and free access of civil terminal, jointly used runways and separate civil apron/taxiways. Furthermore, the establishment of customer-oriented services at joint infrastructure elements are of high importance as well as the contractual agreements of jointly used services including payment terms.
The commitment of investors to participate in the opportunities in the Turkish market can be earned by achieving financial stability, political support, mutual and sustainable objectives and by ensuring the right advisors mediate the process.

If you are interested in Lufthansa Consulting’s expert advice for airports in comprehensive projects all over the world, please contact Mail@LHConsulting.com.

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