T hose looking for an example of the benefits that privatisation can bring need look no further than Tirana International Airport and the transformation it has undergone since being acquired by a HOCHTIEF AirPort-led consortium five years ago.
When the consortium signed a 20-year BOOT (Build-Own-Operate- Transfer) concession to operate the airport in 2005, its terminal building was effectively a relic from another time.
In fact, with little being done in decades to update its aging infrastructure, Albania’s only commercial airport was desperately in need of investment to breathe new life into it, and that is just what the new owners have done. “It is not an understatement to say that we have totally transformed the airport since becoming the concessionaire in 2005,” enthuses Tirana International Airport (TIA) CEO, Andrea Gebbeken.
“Before we arrived it was a state entity and, in all honesty, badly in need of an upgrade. It is hard to believe now, but the airport didn’t even have a perimeter fence back then. The terminal was small and had insufficient capacity to meet demand and there was also a lack of internationally accepted service and security standards.
“On top of this, there were many operational deficiencies and a lack of personnel with the training, knowledge and experience required by a successful, customer focused airport operator.
“Thankfully, all of this has changed and we now have state-of-the-art facilities and a modern and efficient airport company that operates to the highest international standards. Safety and security have also been taken to another level and we’re considered an environmental pioneer.
“I don’t think it would be wrong to say that today’s Tirana International Airport is actually a showcase for modern day Albania.”
A commitment to upgrade TIA was certainly part of the terms and conditions of the operating contract, and the new owners wasted no time in getting to work, starting construction on a new passenger terminal within months of taking over.
It also set about building a new cargo terminal, 500-vehicle car park and water-treatment plant, and enhanced the airfield with new runway lighting and navigational aids.
Phase one of the airport’s transformation was completed in 2007 when TIA opened a new €40 million passenger terminal capable of accommodating one million passengers per annum.
Its opening suddenly made the airport more attractive to the airlines and a number of new carriers and routes led to passenger numbers soaring.
Indeed, the rapid growth took even the airport by surprise and meant that within nine months of the new terminal opening and two years ahead of schedule, it announced plans to build a 4,800sqm extension.
“Basically we had no choice but to expand the building if we wanted to maintain the operating standards and levels of service our customers have become accustomed to expect,” admits Gebbeken.
TIA also had a contractual obligation to extend the terminal after agreeing with the Albanian government that it would expand the facility once passenger numbers exceeded 900,000 per annum.
The terminal extension opened for business last September and Gebbeken is confident that passengers will be impressed by the difference a 30% increase in floor space makes to the passenger experience at TIA.
“It has allowed us to increase the size of the check-in and departure areas, build a bigger business lounge and add more offices, shops and restaurants,” she notes. “We have also added three more gates and 1,000sqm of apron capable of accommodating up to five aircraft.
“Check-in was expected to be one of our bottlenecks, so we have doubled the size of the area and this is no longer an issue. The lack of departure gates started to become noticeable at times as we only had four, but now that we have seven, the issue is resolved. We now have sufficient capacity for at least the next couple of years before we need to expand again.”
The newly expanded terminal has raised TIA’s capacity to 1.8 million passengers per annum and takes the new owner’s investment in the gateway past €70 million.
In addition to HOCHTIEF AirPort, the airport counts DEG – a subsidiary of Germany’s KfW banking group – and the Albanian- American Enterprise Fund (AAEF) as shareholders. The latter, an organisation founded by the US government to support the development of private enterprise in Albania, holds a 21.3% interest while HOCHTIEF and DEG enjoy a 47% and 31.7% stake respectively.
Nearly 1.4 million passengers (+10%) passed through TIA in 2009, cementing its status as one of Europe’s fastest growing airports.
Albania’s capital city gateway also registered a healthy 4.5% rise in aircraft movements, accommodating a record 20,064 flights last year, although cargo throughput dropped by 13% to 1,711 tonnes.
So what does it feel like to be the CEO of one of Europe’s fastest growing gateways? “It is very rewarding to know that our efforts to develop the airport continue to pay off in terms of rising passenger numbers, but coping with growth is also a challenge,” concedes Gebbeken.
“Whereas most other CEOs in Europe were dealing with the impact of traffic decline last year, we were handling record numbers and focused on making sure the terminal extension opened on time to ease congestion.
“The other key challenge we face is that of striving to maintain customer service standards and service levels while handling an ever increasing number of passengers. It is a good pressure to be under though, and I am sure that many other airports would like to be in our position.”
Remarkably, last year’s 10% rise in passenger traffic was one of the lowest annual increases in Tirana over the last five years. Indeed, TIA believes that the figure could have been far higher had it not been for the global economic downturn that led to many putting trips to Albania on hold.
Modest Gebbeken notes that although she has overseen the recent upgrade of TIA, she cannot claim to be responsible for the turnaround in its fortunes as she was only appointed CEO in July 2007 and the gateway has enjoyed double-digit growth in passenger traffic for five successive years.
She also has no qualms about acknowledging the fact that although the recent upturn in passenger numbers is impressive, the traffic levels the new-owners inherited were much lower than they should have been.
Indeed, the untapped potential of the airport was the key reason behind the consortium’s decision to bid for the 20-year operating contract, despite knowing that it would have to invest significant sums on upgrading TIA’s infrastructure.
The airport’s mission to attract more airlines and expand its route network has certainly been helped by Albania’s growing economy, which appears to have undergone its own transformation in the past decade.
“It’s easy to forget that Albania was more or less closed to the world for more than 50 years. Few people were allowed in or out and, as a result, it has a lot of catching up to do today,” says Gebbeken. “The percentage of the population that has never flown on an aircraft or been abroad is still high here and we want to help change that.”
And TIA’s CEO believes that the strong family ties of Albanians will be a key factor in driving up passenger numbers, with many seizing the opportunity previously denied them to visit friends and relatives (VFR).
It is already happening to a certain extent, with many Albanians returning to their homeland once or twice a year to visit family, but Gebbeken feels that much more is to come from resident Albanians as the economy grows and air travel becomes more commonplace.
Around 3.5 million people live in Albania and another 750,000 Albanians are estimated to live abroad, principally across Europe and North America, so Gebbeken insists that there is plenty of scope for growth.
Inbound traffic has been boosted by an ever-increasing number of tourists flying to Albania to visit attractions such as the ancient Greek city of Buthrotum, a UNESCO World Heritage site. The country also has its fair share of beaches, Roman and Ottoman ruins, mountains and forests.
The Albanian government’s 2008 decision to scrap the need for entry visas for most foreign nationals has certainly helped increase tourist numbers, which are expected to rise steeply over the next few years as new hotels and beach resorts open.
“The levels of growth that we’ve enjoyed over the past five years demonstrates the strength and future potential of the Albanian market,” muses Gebbeken.
Gebbeken is, however, reluctant to make any predictions about traffic growth or even reveal what TIA’s passenger forecast is for 2010, saying that it is not company policy. Indeed, the furthest she will go, when pushed on the matter, is to admit that passenger traffic for the first quarter of 2010 was on a par with last year when the airport broke all records.
Thirteen scheduled airlines currently serve Tirana operating non-stop flights to 33 destinations across Europe and Asia. The top five carriers are Belle Air (42.8%), Alitalia (13.4%), Albanian Airlines (8.9%), Austrian Airlines (5.9%) and Turkish Airlines (5.6%).
Tirana-based Belle Air’s dominance is based on its network of routes to Italy, Germany, Switzerland and Kosovo and it also operates seasonal charter flights to Egypt and Turkey.
The combination of airlines and routes served effectively make Tirana an O&D gateway, with the bulk of passengers originating in overseas markets, and coming to Tirana either for business, leisure or to visit family and friends.
After a few busy and highly effective years in Albania, firstly establishing itself in the market and then planning, funding and overseeing the completion of two major expansion projects, Gebbeken hopes that 2010 will be a quieter year for TIA in terms of challenges.
“A year consolidation where we can catch our breath for the future challenges that lie ahead would suit me just fine,” she says.
After her hectic schedule of the last few years, it doesn’t seem too much to ask, does it?
Airport World 2010 - Issue 3