Construction to go ahead

Published: 6/26/2000

The long-awaited announcement that Aeroflot will go ahead with the construction of its $300m terminal at Moscow's state-owned Sheremetyevo Airport has been made. Originally announced in 1998, the terminal is due to be completed by 2003. It will be known as Shermetyevo-3 and is seen as providing full entry for Aeroflot into its recently agreed alliance with Delta, Air France, AeroMexico and Korean Air, which is as yet unconsummated due to the lack of facilities at Aeroflot's Moscow base. The go-ahead, which was announced in conjunction with Sergey Franks, Minister of Transport, still lacks the necessary funding, which will be decided through an investment tender in the autumn, although the airport's authorities are reported to have disagreements with Aeroflot as to the specification and ownership of the project. The new terminal will service Aeroflot domestic and international flights, bringing together flights currently operating out of Sheremetyevo's two terminals. The capacity of the terminal, according to Aeroflot, will be 12m passengers a year, a significant increase on the 11m passengers that Sheremetyevo expects to handle this year and potentially meeting the target of 30m passengers handled anticipated by Sergey Sutolov, General Director of the airport, in 2015. The airport currently handles 33% of all Russian international traffic. The new terminal, on which Aeroflot hopes construction will begin in 2001, will be built on 50 hectares close to the airport's second terminal on land leased for 49 years from the Moscow Region's Khimki (Khimkimsky) district, the latter recently involved in a court dispute with Moscow City regarding the inclusion of the airport in their districts. In additional to the terminal, the new complex will include a hotel, a business centre and parking for 750 cars. The tender for the construction of the terminal and financing is expected to occur this autumn and according to Vladimir Smirnov, head of ground services at Aeroflot, potentially offers the tender winner a payback within eight to ten years, according to studies undertaken by Aeroflot and management consultants McKinsey. This is providing fees rise from their present levels and Aeroflot's business keeps the new terminal fully utilised. The documents for the tender process are due to be completed by the end of the month and may offer investors the potential comfort that the government-owned airport might receive guarantees. The shareholders in the new venture will be the new construction company/consortium, Sheremetyevo and Aeroflot. Although the particular split of ownership of the JV remains unclear, with the two Russian participants jockeying for holdings and still to agree on the exact split, which is reported to be in dispute. Some sources have suggested Aeroflot is looking for 40%, with the balance split between the two other parties. The airport management in particular does not see the need for the fast build of the terminal given that high-quality airport capacity that exists elsewhere in Moscow. Domodedovo's new terminal, with its improved rail links to central Moscow, has been aggressively promoted by the airport's owners, East Line Group, which has been trying to persuade foreign airlines, including Lufthansa and Air France, of its attractiveness as a Moscow entry point. The airport's management also believes that the development of Aeroflot's alliance will take business from the rest of the airport, as it will service partner airlines and aircraft through the new terminal. Sergey Sutolov has expressed in the past, his unhappiness with the terms offered by foreign contractors/funders for such projects, believing that they are unfavourable to the airport. He may also be concerned that the venture may absorb available funds making the long overdue reconstruction of the airport's other terminals difficult to finance, as the sources for the new terminal will be the same as those anticipated to provide funds for the other terminals. The project is also developing against a background of active debate between various interested parties regarding the development of Moscow's major airports. This involves Mayor Luzhkov of Moscow, who has eyed Sheremetyevo Airport for some time and has repeatedly demanded jurisdiction or a stake in the airport. The East Line Group has also been reported to be actively encouraging the FSVT and the Ministry of State Property to consider consolidating the state's airport assets and create a Moscow Airports Authority controlled reportedly by themselves.

Article ID: 1875