Tuesday, December 20, 2011

Airport Concessions and Taxes

Interairports, owned by Grupo Terra's President, Freddy Nasser, and operated by Edgardo Maradiaga, has had the concession on airports in Honduras since 2000 and the current concession was set to run untiil 2020.

Now, Interairports has announced it will invest $129 million to build a passenger and cargo terminal at Soto Cano Air Base, also known as Palmerola, about 82 kilometers north of Tegucigalpa.

This would become Honduras's fifth international airport, joining those at San Pedro Sula, La Ceiba, Roatan, and Tegucigalpa.

Interairports, or Aeropuertos de Honduras as it now wishes to be known, announced a $300 million investment in Honduras's airports, including $52 million for San Pedro, $42 million for Roatan, $45 million for La Ceiba, and $7 million for Tegucigalpa.

The proposed investment in a modern terminal and separate cargo area at Palmerola that will be able to accommodate up to 1 million passengers and aircraft up to the size of 747s and Airbus 330s has a projected $129 million price tag.

Curiously, that leaves $25 million of the proposed $300 million investment unaccounted for.

Back in 2008, Interairports told the Honduran government that it would take rather more to build the facilities contemplated in Comayagua: $166 million, to be exact.

Now, with the new proposal and new numbers, Interairport's concession has been extended by the Honduran Congress to 2040, without discussion or bidding by other companies.

The concession extension was a quid-pro-quo for Interairport's announced $300 million investment.

Perhaps needless to say, this deal does not follow government regulations for large contracts.

We can't help wondering how much of the construction work will be outsourced to Grupo Terra's construction division, thus moving the "investment" in airport improvements back into Freddy Nasser's pockets.

But there is a much more immediate return on the investment that was part of the deal.

After extending the concession for twenty years, Congress passed a bill nearly doubling of the airport exit tax paid to Interairports for operating the airports, from $37 to $60.30. This tax is separate from the security tax, collected to pay the cost of required airport security, and the immigration tax, paid to the government.

This would generate about $36 million/year for Interairports at current passenger levels, or, assuming passenger levels stay the same, $1.044 million over the life of the concession.

This move makes Honduras's exit tax the highest in Central America, where comparable charges range from Panama at $40 to El Salvador at $20. An executive of Interairports, who did not wish to be named, was curiously inaccurate when he told La Prensa that:
"the airport taxes in Central America revolve, with the exception of Panama, around 60 dollars and by this measure we are standardizing Honduras with the rest of the region."

This is really new math: $20-$40 is "around $60".

An Interairports executive told La Tribuna that this increase was appropriate because Honduras's 600,000 annual passengers was "very low." That's supposedly the total number of passengers at all four airports. But there's also something wrong with this number, since publicly available sources cite over 600,000 annual passengers at Ramon Villeda Morales airport in San Pedro Sula alone (here, here, and here, for example)

By way of comparison, Juan Santamaria Airport in Costa Rica serves about 4.1 million passengers annually. Tocumen airport in Panama serves 3.1 million passengers annually. El Salvador International Airport in El Salvador gets about 2 million passengers annually. Augusto Sandino International airport in Nicaragua serves about 1.1 million passengers annually.

Congress extended the concession to 2040 as part of a deal between the Executive Branch and Interairports, approved in the November 29 Council of Ministers meeting.

The question of why Honduras needs an airport in Comayagua alone that can handle 1 million passengers annually when that's more passengers than all four airports combined supposedly see now is left unanswered; as is the question of why Congress approved the exit tax increase without debate.

How this will affect tourism in 2012 is also unknown, but at least here, there's a clear indication of what the answer likely will be. In Europe, where high airport taxes are all the rage now, airlines expect a 5% reduction in passengers next year.

Juan Bendeck , president of the Camara de Turismo de Honduras (CANATURH), calls the new tax "robbery". But in this case, the robbery is taking place in plain sight.

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