The concession agreement for the lease of the airports in Podgorica and Tivat stipulates that the concessionaire invests 300 million over 30 years, but there are no figures for the phases, only listed projects, which also require prior conditions, such as the state resolving property disputes. There is no obligation for the airports to have an increase in the number of passengers during this period, but rather an increase in the capacity of the possible number of passengers through the expansion of terminal buildings and new aircraft platforms.
Success indicators for the concessionaire are introduced, and each negative point due to delays and downtime reduces its income. For any disputes between the state and the concessionaire, the contract specifies Vienna as the place of arbitration.
This is stated in the proposal for a 30-year concession agreement for the Podgorica and Tivat airports to the South Korean company "Incheon", which was prepared by the Government, but must be adopted by the Parliament because the value of the assets of both airports is 264 million, i.e. it is higher than the limit of 150 million up to which the executive branch can decide independently.
The proposed contract stipulates the concessionaire's obligation to pay a one-time concession fee of 100 million, a variable concession fee of 35 percent of annual revenue, and to invest 300 million in both airports over a period of 30 years upon conclusion of the contract.
The contract does not specify the investment amounts by phase, but it states which works need to be done and that they are in accordance with the specified standard, as well as with the list of investments from the concession act that was published with the tender announcement in July 2019.
Taking over all workers under the existing contract
It is envisaged that after signing the contract, the Korean “Incheon” will form a project company that will take over the obligations from the contract and manage the airports. No later than 90 days from the conclusion of the contract, this company must prepare an Initial Transfer Plan and an Employee Transfer Plan and submit them to the Government, after which the Government and the concessionaire will agree on the date when the concessionaire will take over management.
By the date of takeover, the concessionaire must appoint persons who will manage the new company and who must have the specified professional references, and must also take over all current employees of Airports of Montenegro with the current Collective Agreement and individual employment contracts.
The concession agreement also prohibits the termination of employment contracts with employees working for an indefinite period of time within five years after the Koreans take them over, although this provision does not prohibit the termination of the contract during that period due to the employee's fault in accordance with applicable legislation and the Collective Agreement.
Price increase approved by the Government
“Incheon” will pay a variable concession fee of 35 percent twice a year, based on a calculation approved by the Government. The concessionaire is entitled to revenues from aviation and non-aviation revenues generated at the airports. In the event that it wants to increase the prices of airport services, it must conduct an analysis and prove that it is necessary due to inflation or other reasons, which it submits to the Ministry of Transport for approval at least 90 days before it wants to change them. The Ministry reserves the right to approve or disapprove a change in the prices of airport services, provided that non-acceptance may “constitute a Significant Adverse State Action”, on the basis of which the concessionaire may initiate a dispute and arbitration.
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Vienna has been designated as the place of arbitration in this or any other possible dispute regarding the failure to issue permits and consents within the stipulated deadlines, disagreements regarding the amount of the annual variable concession, or other issues...
Expanded runways, new terminals...
In the next three years, Podgorica Airport should receive a new passenger terminal with an area of 12.500 square meters, an expanded runway and two new platforms for servicing large passenger aircraft, while Tivat Airport would receive a reconstructed runway in accordance with international standards, the terminal building for passenger reception would be increased from the current 7.400 square meters to 14.800 square meters, and optionally a maritime passenger terminal.
In the second phase of investments, which will last for the fourth and fifth years of management, Incheon Airport will provide three more landing platforms for large passenger aircraft at Podgorica Airport, expand the general aviation platform and expand the taxiway, and at Tivat Airport, build a new taxiway in accordance with ICAO requirements and further expand the terminals.
For the third phase of investments, which would last from the sixth to the 30th year of management, it was stated that "investment works will be performance-based, with the scope and timeframe of the expansion being solely determined by traffic growth and the need to comply with service level requirements."
The capacity of Podgorica airport should be 5,7 million passengers per year in seven years, and Tivat airport should be 3,7 million in five years.
New terminal in Tivat, if 4 million passengers pass through
At this stage, the construction of a new passenger terminal, with an area of at least 12.500 square meters, is planned at Podgorica Airport. The construction of a new terminal building "Jug" is planned at Tivat Airport, but with the fulfillment of the previous conditions that the number of passengers at this airport increases to four million (last year it was 1,3 million) or that traffic growth with the current terminals becomes impossible.
The construction of this terminal building also requires that the land, which is currently under property disputes, be available for at least five years before the conditions for increasing the number of passengers to four million are met.
After the end of the 30-year concession period, airports with new infrastructure and equipment are transferred to state management.
Negative points and reduced revenue are received for all delays and downtime.
The concessionaire will be obliged to periodically conduct passenger satisfaction analyses, while the state will have the right to monitor service quality indicators. This is intended to monitor whether it is fulfilling its obligations regarding the quality of services provided at airports.
Penalties for failure to meet quality maintenance obligations are provided for in the form of a reduction in gross revenue for the state. For example, penalty points are awarded if 15 percent of departing passengers wait for airport services for more than 10 minutes or if one percent of passengers wait for more than 30 minutes, as well as if 15 percent of arriving passengers wait for more than five minutes and if one percent of arriving passengers wait for more than 20 minutes.
The baggage system, elevators, stairs, air conditioning, information displays,... must operate for at least 95 percent of the airport's operating hours; any downtime that lasts longer also results in negative points and a reduction in revenue.
If passengers' ratings on service quality, hygiene, information, and customer service are not at least 3,8, they also receive negative points.
Illustration of PG Airport from the 2011 Master Plan
The documents for the concession agreement used illustrations of the expansion of Podgorica Airport from the Airport Development Master Plan, which was prepared for the needs of the state in 2011.
This Master Plan envisaged that the state, alone or with a private public partnership, would invest 164 million euros in the modernization of the airport by 2030.
Considering that this estimate was made 15 years ago and the impact of inflation, it is the same or close to the currently planned investment of 300 million.
Apart from the temporary new terminal building in Tivat, almost nothing else has been done according to this Master Plan in the previous period.
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