The accompanying relationship of the draft law on extending the concession period of the Rinas Airport in exchange for the partial abolition of the exclusivity clause does not carry any economic assessment of the costs and potential benefits of Albania from this amendment to the contract.
The Albanian government sent to the Albanian Parliament Friday (April 22nd) the proposal to amend the concession contract of the Rinas Airport, but the accompanying report of the proposal does not carry an economic estimate for the possible losses or benefits that this change is expected to bring.
The proposal gives the consortium automatically two additional years to the 20-year initial contract, a change that can bring additional costs to the Albanian economy by the international fleet monopoly, while the benefits are unsafe.
The Albanian government has been negotiating from 2007 with the company to which the international fleet monopoly has been awarded with a concession contract approved by the Albanian Parliament in 2004 to remove the exclusion clause and to open the road to development possible new airports in the country. Throughout these years, Rinas Airport has held high awards achieved through negotiations with the Ministry of Transport and has made huge profits up to 30 percent over its revenues. The company, whose shareholders have changed several times over ten years, has rejected the government’s request to lift the franchise clause by seeking compensation.
After many years of talks, the Ministry of Transport declared on April 1 that it had reached the agreement, according to which, Rinas Airport partially waives the exclusive flight rights in exchange for extending the contract. Under the agreement, which should be approved by the Albanian Parliament to take legal effect, the Tirana International Airport wins two additional years in the current contract and allows the Albanian government to open for international flights to Kukes Airport while the contract will be extended further to if Albania decides to open an airport other than Kukes. The government has earlier expressed the desire to develop the former military airport of Vlora for civil transportation. According to the amendment of the contract with TIA, the concession of Rinas will be extended by 0.5 years each year for additional operation of a potential airport in Vlora. The current contract has begun to apply on 23 April 2005 and expires in April 2025. With the current proposal, it is automatically added until 2027.
But while the Ministry of Transport did not make any transparency on how the agreement was reached, the Competition Authority published a decision explicitly requiring the proposed formula for the agreement to be rejected.
The Competition Authority in its opinion suggested that the extension of the terms of the agreement should not be accepted by the Ministry of Transport but should be based on a clear logic of costs and benefits. According to the reading of the proposed amendment of the contract by the Competition Authority, the concessionaire receives two years of contract extension regardless of whether the Kukes Airport is operated or not and regardless of what market share and what damage the Kukes airport may cause.
According to the advice of the Competition Authority, the concession contract could extend itself to the market share that the new airports receive from Rinas, which means that if Kukes fails to develop as an alternative airport, the Rinas Concession Contract does not reasons to extend.
Currently, Rinas realizes profits of 8 to 10 million euros per year, profits that are intended to increase along with the increase in the number of passengers, because the current concession contract allows for revised service tariffs increasing in situations where costs rise , but does not allow revising utility tariffs in the conditions when, as it happened, the number of passengers grew rapidly by generating monopolistic profits for the company.
“No cost to the state”
The Ministry of Transport declared on April 1 when it announced the agreement reached that the amendment “will not create additional costs for the state”, but the fact is that the extension of the contract will bring losses to the state. According to the current contract, Rinas Airport should be returned to the Albanian state in 2025 and consequently, the company’s profits for the years 2026 and 2027 should go to the state budget rather than the concession company.
Rinas Airport is a typical case of a concession contract negotiated by a government to the detriment of the country’s interests, which has been accepted to date by both political parties that have governed Albania. It is one of the many concession contracts that have created de jure or de facto monopolies, duopolages or oligopolies, which unnecessarily burdened costs in the Albanian economy by making undeserved profits for concession companies.
Meanwhile, the concession contract of the Rinas Airport was purchased by current shareholders from two new companies, China Everbright Ltd. and Friedmann Pacific. A buyer’s press release did not disclose the transaction price, but stressed that the deal to “create a stable source of revenue and a good return on investment”. New owners are investment fund managers from China and Hong Kong. /Reporter.al/
