Airport concessions reduce passenger numbers, reduce overall budget revenues, increase fiscal risks, and weaken the operational sovereignty of the state. For a country where tourism is the main economic sector and which does not have a developed road and rail infrastructure, such an arrangement poses a risk.
This was stated by the executive director of Fidelity Consulting for "Vijesti". Miloš Vuković, which calls for stopping the process of giving Montenegrin airports in Podgorica and Tivat under concession.
"From the beginning of the procedure, it was clear that the political control tower was guiding the plane of the public interest of the state of Montenegro on a course that suited only one passenger - the concessionaire. The Government's Navigation Plan for Airports, instead of multiple alternative routes, offered only one corridor: the transfer of the most valuable air assets that are strategically important for the tourism industry that generates 30% of GDP. If we now hand over the public to private interests, we will become economy class passengers in our own airspace with a more expensive ticket, with the loss of sovereign management of the space and a weaker tourism industry. The choice, I deeply believe, is really easy," Vuković emphasized, adding that the scandal that characterized the work of the tender commission in which members first vote one way and then the other is, among other things, sufficient reason to cancel this tender.
According to him, by giving the Airport a concession, we are losing strategic autonomy as a state, so in the event of emergencies (fires, evacuations, medical flights), the state will no longer have full control over slots and prices.
"Let's remember the COVID situation. From infrastructure that was considered a public good, we are moving to a regime in which even emergency interventions must fit into the commercial schedule of the concessionaire, as evidenced by regional experiences," Vuković pointed out.
What kind of company are we giving concession to?
The interviewee of "Vijesti" explained that the aviation industry is the only commercial activity that simultaneously manages operations both in the air and on the ground, and that all market players in that system continuously, 24 hours a day, strive to attract every client. "I deliberately use the term "client" in a broader sense than the word "passenger", because it includes anyone who spends money within the aviation ecosystem, whether during the flight or at the airport. Clients are, therefore, both passengers themselves and those who do not fly, but accompany the passenger and contribute to the industry's income by paying for parking, arriving by taxi or bus, and purchasing food, drinks, goods and services while at the airport. The first encounter with the destination occurs precisely at the airport, which by its nature functions as a monopoly entity. In this context, the question arises as to why Montenegro initiated the process of granting the Montenegro Airport concession and what consequences may arise from signing such an arrangement," said Vuković.
He emphasized that (ACG) is a stable, low-debt, liquid and solvent company, and that so far there have been no significant incidents at the Airports, which means that a high level of safety and security has been achieved.
"ACG owns valuable assets worth over 120 million euros and employs almost 1.000 people. They have 40 million euros in cash in their accounts, while in 2024 a net profit of €10,7 million was recorded (a net profit rate of as much as 25%), with a projected passenger growth of 2025% for 12. On the other hand, the renovation and improvement of the airports in Tivat and Podgorica is being persistently postponed, investment projects have been on the list of unique infrastructure projects for 10 years. In those 10 years, a minimal shift of Tivat airport to a slightly better category has been recorded, while Podgorica has remained in the same category of low project readiness, which clearly proves that the strategic resource of this country is being consciously neglected," Vuković stated.
According to a 2015 analysis by the company Steer Davis Glew, which treated the Tivat airport, with an investment of 43 million euros, the net economic benefits of the project for 15 years were estimated, according to Vuković, at 348 million euros in net present value by 2030, with a benefit-cost ratio of 4,6:1 and an economic internal rate of return (EIRR) of 24%.
"These indicators suggest a project of high economic and social value. If this is a projection for only 15 years and only for Tivat Airport, imagine what profits and increase in the number of clients Montenegro Airports would generate if they included Podgorica Airport in the projection and increased the term from 15 to 30 years, which is how long the concession would last," Vuković pointed out.
Macroeconomic context of the concession
He said that the Montenegrin economy's dependence on the tourism industry is enormous and that it generates up to 30% of our GDP, while the money spent by foreign tourists "land" in the country mainly through two state airports.
"Passengers and their companions who land fill hotels, apartments and catering facilities, shop in stores, take taxis or rent a car and use other services of the tourism industry. In other words, they are the main driver of tourism. On the other hand, the state has direct benefits - through VAT and excise duties, tourists influence the filling of the state budget and increase employment, and contribute to the stability of public finances through multiplicative effects. The mechanism is quite clear - when the number of clients arriving at airports increases, budget revenues increase, when it falls, the inflow of money into the budget also falls. It can therefore be concluded that for Montenegro the crucial metric is the growth of the total number of passengers at airports, which is not defined at all in the concession arrangement," said Vuković.
According to him, the concession model essentially transfers control of airports from the state to a private operator, whose primary metric is profit per passenger.
"Completely naturally, in order to increase this indicator, the operator logically raises airport taxes, restricts access to low-cost companies and increases the prices of services at the terminal, parking and the entire area it manages. All this affects a lower total number of passenger arrivals than if the airports remained under state management - precisely the metric that supports the tourism industry and the full state budget. Simply put, by giving the Airports a concession, they become a profit center and not a development center, which can have far-reaching disastrous consequences for Montenegro, considering the above-described dependence of GDP on the tourism industry," concluded Vuković.
Concessionaire can pledge assets worth 120 million for a loan
Vuković stated that Ryanair's chief commercial officer, Jason McGuinness, stated at the beginning of the year that "the Belgrade airport is too expensive and is not an option for us at this time. Do not allow foreign concessionaires to manage your airport, because they do not care about the development of the airport, business or the creation of new jobs."
"The situation is clear if the price of a plane ticket increases by a few dozen euros due to an increase in tariffs by the concessionaire, low-cost airlines, which transported over 2024 passengers through our airports in 600.000, will easily redirect to other airports. Montenegro then loses not only one passenger, but the entire consumption chain that accompanies him. The social aspect is no less benign. Airports employ around a thousand people, mostly qualified experts, with the obligatory conclusion that it is necessary to reduce the number of employees while respecting legal regulations. On the other hand, private operators usually switch to outsourcing and flexible contracts, with the possible import of foreign, lower-paid labor, which leads to a reduction in permanent jobs and unstable contributions to social funds," said Vuković, adding that their orientation towards increasing non-aviation revenues is additionally affected by the reduction in aviation revenues in total revenues.
He pointed out that the state has committed to paying for the expropriation of land for the expansion of runways and access roads (in Tivat alone, about 50 hectares, mostly in the coastal zone), which is measured in tens of millions of euros.
"We should not ignore the fact that the concessionaire will be able to pledge the assets of the Airport of Montenegro, worth over 120 million euros, as collateral for loans. Additionally, the Master Plan for the Development of the Airport of Montenegro until 2030, which was adopted in 2011, does not envisage giving the airport under concession. The question arises as to why and in whose interest is the state's strategic document in a strategic branch of the economy being trampled on," asked Vuković.
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