ARCHIVED - Corvera airport in crisis?

Or just a political game of "He who dares, wins."

"the government is preparing to execute the loan guarantee which will oblige it to take on the loan and capital  repayments. In compensation, the regional government will become the new owner of Corvera airport.”

Corvera airport (AIRM) has once again been in the news this week as peak holiday season approaches and flight timetables still stubbornly contain the words Murcia-San Javier, in spite of the infinitely superior facilities of Corvera airport being completed and ready for business for more than a year.

Regional politicians have been demanding answers following a cutting article in El Confidencial, which hit the news stands at the same time as a piece in La Opinión, which stated, “The Corvera airport concessionary ( Aeromur) has stopped paying the 200 million euro loan guaranteed by the Autonomous Community of the Region of Murcia. The Aeromur consortium, headed up by constructor Sacyr, has thrown in the towel in the face of the impediments being encountered to initiate operations in the airport, leaving the regional government to take over the loan commitments.”

The article went on to say, “The airport has been finished for 15 months, but there is still no prospect of an imminent opening. In order to open the airport requires certification from the Spanish Air Security Agency ( Aesa)and from the EU, which have been undergoing bureaucratic processes for months. It is also necessary to reach an agreement with Aena to transfer airline operations from San Javier to Corvera, in order that the (private) airport does not have to compete with a public airport.”

It then gave a brief history of the construction history of the airport and  an explanation of how the regional government of Murcia agreed to guarantee the 200 million euro loan required in order to complete and open the airport, before concluding, “In the last few months relationships between the concessionary and the executive have been deteriorating to a point at which Aeromur has stopped meeting its payment  commitments, whilst the autonomous community blames the society for not fulfilling the terms laid out in the contract.

The financial entities who loaned the money have tried to maintain an attitude of prudence, but the government is preparing to execute the loan which will oblige it to take on the loan and capital  repayments. In compensation, the regional government will become the new owner of Corvera airport.”

The article provoked a flood of press releases  from opposition politicians demanding answers, and confirmation about the statements made in the article, although surprisingly, the regional press who are generally regarded as being more supportive of the regional government failed to cover the subject until today when Antonio Sevilla answered questions about the issues at a press briefing for an unrelated subject.

However, the regional press have covered the icing over of relations between the regional government and concessionary Aeromur ( comprising Sacyr, BMN, SabadellCAM, Infucapital, Inprisma, Cementos Lacruz and  Montoro e Hijos) which began when the regional government declined to renegotiate the terms of the concession before Easter.

The Murcian regional minister for public works, Antonio Sevilla, gave an alternative version of the facts, from the regional government’s point of view.

He stated that, “Aeromur, the airport concessionary, could open the airport if it wanted to, as it now has all the necessary permissions, “ but that the concessionary insists that San Javier close before it does so, “whereas in the contract that it originally signed, right at the beginning, the concessionary pledged to open the airport , without the closure of San Javier being a condition. “

He said that Aeromur was declining to open the new installations alleging that without the closure of San Javier airport, an issue which had still not been satisfactorily resolved with Aena, that there were problems caused by lack of traffic and lack of economic viability, “Aeromur would like to make sure that the airport fulfils their commercial needs, the closure of San Javier co-inciding with the opening of Corvera, “ he said. However, he insisted, the concessionary had signed a contract in which it agreed to open the airport, without the condition that San Javier close in order for it to do so. This particular point is very important as it now appears to be the main reason why the airport is not yet open.

“In this document terms were agreed and laid out in black and white, stipulating quantities, dates, conditions and circumstances. Logically, as the body charged with looking after the interests of the Murcian people, the regional government has to make sure that this contract is complied with, “he said.

When questioned about whether the regional government intended to execute the loan guarantee, the minister replied that the concessionary had not stopped making the payments as it claimed, as a reserve fund was in place containing two million euros to cover payments “in the eventuality that the payments couldn´t be met.”

“ I very much hope that the airport will be open before the concessionary uses up the reserve fund, “ he commented, noting that the concessionary has the debt with the bank, not the regional government, and indicating that he had no idea when the reserve fund would be exhausted.

He explained that the difficulty for the regional government would arise as and when the fund was exhausted but that the regional government would like the concessionary, “ to open the airport as soon as possible and that the concessionary applied itself to the task of doing precisely that. “
Negotiations with the concessionary were being carried out at “the highest level,” he affirmed, and that it was in the interest of the regional  government as well as the concessionary for this to be commercially viable, but also warned that the regional government “has to execute corresponding processes when stipulations are not complied with .”

He insisted the regional government had requested that the concessionary open the airport, in spite of the fact that no agreement had been reached with Aena regarding the closure of San Javier.

The non-viability of having two airports so close together is certainly a topic which has been discussed on these pages for a very long time,( see 23rd June 2010) and the question has been asked on many occasions why this subject was not dealt with from day dot before spending so much money on a private airport, although only the most far-sighted could have predicted the massive downturn in traffic through San Javier following the onset of the economic crisis.

Unfortunately, no statistics have ever been found which can detail how much of the “tourist traffic” coming to Murcia during the boom years related to the residential tourism sector, ie inspection visits or buying trips relating to the property purchase or those who had purchased, or their visiting family, coming to their new properties. Certainly in the boom days the money spent by Polaris world on UK TV and magazine advertising, as well as the huge investment made by property professionals into marketing Murcia brought tens of thousands of prospective international purchasers to the region, all of which has now virtually stopped.

The concessionary is quite right to worry about flight statistics: as a quick illustration, let’s look at the last set of airport stats released for San Javier, those of February 2013. In February of this year San Javier processed 24.179 passengers, whereas in February 2007, just before the property bubble began to implode, the airport handled 108,572 passengers, a massive drop.

However, by 2008 the writing was already on the wall and traffic stats to San Javier began to drop, a pattern from which they have never recovered. if we look, for example at the February stats for 2010, BEFORE the paperwork was signed to guarantee a 200 million euro loan and continue with the construction at Corvera, passenger traffic had already fallen to 60,209, a fall of -26.07% from 2009.

The lack of finance to promote the region abroad, allied with the property implosion have both contributed to a declining market and the failure to take advantage of the Ryanair airbridges row in Alicante and secure a low cost operator base for Corvera, guaranteeing low cost air traffic passenger volume, has left Alicante with a substantial advantage, a new terminal, government investment, an extended routes schedule and Murcia with a big fight on its hands.

And there’s also the Aena factor to consider. The announcement by President Valcárcel that San Javier would close was made pre- general election, and before the era of iron rule by Ana Pastor gave Aena a much needed kick up the backside, and stringent restructuring began to bring the operator back under control.

With 14 billion euros worth of debts to deal with, the Minister for Development can´t afford to be sentimental, and although closing airports is not on her agenda, she says, neither is opening new ones, and certainly not when the immediate consequence will be a write down of the 70 million euros invested into improving San Javier in the months prior to the elections. The Minister is right to hold out for compensation as she is effectively giving away an airport which isn´t losing money, to a rival for Alicante, into which millions has also been invested to increase air traffic.

And theres also the Paramount factor. In February of 2010 the Minister for Culture returned from FITUR with the news that Murcia could be the location of a Paramount Theme Park, but by June of 2010 the airport concessionary was immersed in a row with Brussels over the validity of the loan agreement signed by the the regional government in February. By this point construction was in full swing but the money had not been released to pay for the workers. In June Brussels approved the loan guarantee and then in September the formal agreement with Paramount licensing to grant a license to build Paramount was signed. The perfect partnership to attract investment for the park, bringing guaranteed traffic for the airport and giving an International airport just minutes from the theme park.

But 3 years down the line there are still planning issues to resolve and construction of the park has not yet begun, whilst questions are still being asked over whether there is sufficient financing to fund the theme park project, no matter how much every business in this region is desperate for both the airport to open and the theme park to become reality.

Sadly, the Region of Murcia is not in a position to take on any further expenditure, and unless central government can be persuaded to help deal with the situation, is helpless, as realistically the new airport will only make new jobs and new opportunities if it extends and expands its operations, as the existing workforce will simply move from one place to another, fully capable of dealing with the existing volumes of traffic.

At the end of the day, the concessionary must decide whether it will walk away with the degree of loss at this moment pre-calculated and written down, or possibly lose more by opening in competition with a state run airport which may not close at all, potentially increasing its losses by all the additional costs to initiate operations.

And of course, although the businesses of the region are helpless to intervene, what will the loss be to the region in terms of potential tourism revenue which decides to fly to Alicante instead, attracted by the extended routes and low cost flight options, and chooses to stay in that area.

The concessionary said tonight following our request for clarification of its position that, “negotiations are continuing regarding the opening of the International Airport of the Region of Murcia, including the necessary permits as well as the fulfilment of the agreement that took place at the time, between the governments of Murcia and Madrid for the transfer of civilian flights from San Javier Airport to the International Airport of the Region of Murcia.”

So for the moment, the battle of words continues and the only wings on the runway at Corvera are those of nesting sparrows, attracted by the prime countryside location, allied with an unnatural air of peace and quiet.

Images: Taken on 23rd March 2011, the day President Valcárcel visited Corvera airport to inspect progress and announced that San Javier would be closing when Corvera opened, provoking a furious row with the Government Delegate, González Tovar, now head of the PSOE in Murcia, who maintained that the government had no intention of closing San Javier..

The full history fo Corvera airport: Articles Corvera airport AIRM