Johan Meyer, Franklin Templeton: "It is necessary to list Bucharest Airports, in order to obtain the financing necessary for investments"

Otopeni Airport needs a new terminal, given that the number of passengers is expected to reach around 21 million in 2030 and 33 million in 2050, well above the current maximum capacity, according to a study drawn up by Netherlands Airport Consultants (NACO), commissioned by Fondul Proprietatea (FP), which was presented yesterday, in a press conference.

The costs related to the construction of the terminal alone would be between 500 million and one billion euros, financing that can be accessed from the capital market. It's just that the Ministry of Transport (which owns 80% of the company) decided to increase the share capital of Aeroporturi Bucharest with the land from Băneasa Airport, which Fondul Proprietatea (which owns 20% of the company) considers to be overvalued, so it attacked the increase capital in court.

According to the report drawn up by NACO, the predicted traffic figures at Baneasa Airport were a key element in the evaluation report which presented a much overestimated value. The report indicates a maximum potential traffic at Baneasa Airport that represents approximately half of that predicted in the disputed evaluation report, which once again indicates a process of increasing the social capital with fundamental deficiencies, according to a statement by Franklin Templeton, the administrator Fund Proprietatea.

Rene Hopstaken, Airport Consultant at NACO, says: "Our data-driven approach, guided by real traffic figures and industry trends, highlights the critical need to expand capacity in the Bucharest area to effectively serve the growing demand for air transport in the region. We believe that Baneasa Airport could function as a complementary airport to Otopeni Airport, but several factors limit its processing capacity. Thus, the main solution for the limitations induced by the airport's capacity is the construction of a new terminal in the coming years".

As a result of solid economic growth and the expansion of low-cost airlines, unconstrained demand (without taking into account infrastructure limitations) is expected to continue pre-COVID trends, reaching approximately 21 million passengers per year in the Bucharest area until 2030. By 2050, unrestricted demand is expected to be approximately 33 million passengers per year, the report states.

After evaluating the existing infrastructure in Otopeni Airport, NACO experts concluded that it could process between 16 and 18 million passengers per year. Depending on the real traffic evolution, capacity limits and service levels considered acceptable, Otopeni Airport could reach this volume of passengers between 2025 and 2030, the report states.

According to the document, a potential opportunity was identified for Baneasa Airport to attract additional traffic that cannot be handled by Otopeni Airport due to capacity limitations. The most suitable candidate airlines to serve Baneasa Airport will be the smaller independent airlines that currently operate at peak times from Otopeni Airport, which means approximately 300,000 - 500,000 passengers annually. The restriction imposed at night for commercial flights (between 22:00 and 6:00) represents a major obstacle for the large low-cost carriers.

The existing terminal of Baneasa Airport has a capacity of approximately 175 passengers per hour or two aircraft movements per hour. In the current scenario for Baneasa Airport, i.e. without any capacity expansion, traffic volumes until 2035 will vary between 340,000 and 840,000, if Baneasa Airport manages to offer favorable conditions for airlines. If night flight restrictions are taken into account, the upper limit could be limited to around 700,000 passengers per year, the statement said. According to the study, in all scenarios the increase in capacity can only go up to a maximum of four aircraft movements per hour. This could increase the maximum annual traffic from 0.7 to 1.3 million passengers, taking into account the night flight ban.

The NACO report provides information that clearly underlines the capacity limits of Baneasa airport. The findings contradict several of the hypotheses of the Băneasa Airport land evaluation report, which is used for the capital increase of Bucharest Airports, contested by Fondul Proprietatea. The evaluator used an annual traffic of approximately 3 million passengers starting in 2022, more than double what could be achieved at Baneasa airport with the current infrastructure, in all the investment scenarios analyzed, the document also states.

Johan Meyer, CEO of Franklin Templeton Bucharest and Portfolio Manager of Fondului Proprietatea, said yesterday in the press conference: "First of all, we have to solve the litigation problem. The best way to do this is to convene the meeting of Aeroporturi Bucharest shareholders, to revoke the decision approving the capital increase. Next, the company's shareholders need to sit down and discuss investment plans. Building a new terminal and improving the existing one are long-term projects. And one of the best ways to achieve them is by listing your company. Because this will allow the funding to be attracted to support the increase in capacity."

In his opinion, building a new terminal will require a combination of equity and debt financing. But, if the capital increase operation with the Băneasa Airport lands continues, then FP will see its holding reduced from 20% in the company Aeroporturi Bucharest to 1%. "No investor will look at something like this again, in the context in which our investment will be reduced to zero," said Meyer.

Rene Hopstaken estimated the costs of the new terminal between 500 million and one billion euros, to which are added investments in facilities, connections, services. "Normally, the period between the start of planning and the time of opening takes about five to seven years," said the NACO consultant.

In October 2021, the Ministry of Transport decided, in the meeting of Fondul Proprietatea shareholders, to increase the company's share capital, from 143.77 million lei to 4.91 billion lei through contribution in kind, namely the land of Băneasa Airport. But Franklin Templeton contested the land valuation of 3.8 billion lei, eleven times higher than the previous valuation of 336 million lei.

At the end of October, the holding of 20% of Bucharest Airports was the largest holding of shares in the FP portfolio, being valued, according to our calculations based on data from the fund's latest reports, at 830 million lei. The total valuation of the company amounts to approximately 4.15 billion lei.