airport financing

Polish government plans mega-airport and aerotropolis

Rose Bridger Poland , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

The Polish government has approved a plan for a mega-airport and ‘airport city’ on a 3,000 hectare site. An area of farmland has been identified as a suitable location for the project.

On 7th November, the second day of the UN Climate Change Conference (COP23) in Bonn, the Polish government approved a plan to build a new mega-airport, called Poland Central Airport or New Central Polish Airport, handling as many as 100 million passengers per year. The project would result in a a major increase in Poland’s greenhouse gas emissions. Poland, host of the next climate summit, COP24, in December 2018, is already widely regarded as a climate renegade for its continued investment in coal plants, and had the dubious honour of being awarded Fossil of the Day award in Bonn, for its relentless efforts to siphon European Union (EU) funds for clean energy into subsidizing its ageing coal plants. Announcement of a major airport project makes a further mockery of the country’s commitments to address climate change.

The proposed airport site is in Baranów, a rural gmina (administrative district) 40 kilometres to the west of Warsaw, Poland’s capital city. The map below, commissioned by Polski Fundusz Rozwoju (PFR) in 2008 and included in an article published on 8th October 2017, about a meeting on the airport between representatives of the government and Baranów municipality, shows two areas identified as suitable for the airport project: a 3,421 hectare area to the north of the map and a larger 11,338 hectare area to the south. Another variant of this map was included in a 100 page document discussed at the government meeting  which adopted the airport plan, Poland’s biggest infrastructure project in recent years, on 7th November. At this meeting it was confirmed that the planned location of the airport is the Stanisławów village area, near the southern boundary of the area identified as suitable for the project.

Poland Central Airport
Map commissioned by PFR showing areas suitable for Poland Central Airport

A map produced by GAAM shows the villages within the boundaries of the two areas identified as suitable for the airport project and the existing road and rail links.

PolandAirport

A satellite image of the Stanisławów village area, confirmed as the planned location for the new central airport, shows the villages and small parcels of cultivated land that characterize the wider area.

A mega-airport, multi-modal transportation hub and an aerotropolis

The schedule for the new airport is for preparatory works to be complete by the end of 2019, then for construction to be complete and operations to commence by mid-2027. A mega-airport is planned, one of the largest in the world with four runways, initially serving 45 million passengers per year, rising to 100 million, a passenger throughput as high as the world’s busiest airports, almost as high as Atlanta in the US and higher than the current traffic levels at Dubai Airport and Beijing Capital Airport. A multi-modal transportation hub is planned, integrating the new mega-airport with existing and new road and rail infrastructure. Plans for the airport include a rail station and the project is also referred to as Centralny Port Komunikacyjny (CPK), which translates as Central Communication Port. The proposed airport site is between Warsaw and Łódź, Poland’s third largest city, and a high-speed rail line connecting the two cities is planned. The A2 motorway running between Poland’s western and eastern borders is immediately south of the proposed site. Immediately north of the airport site is the rail line between Berlin and Moscow, via Warsaw,  providing a high-speed service that commenced operations in December 2016.

The 3,000 hectare land area for the new airport is far larger than would be required even if the number of passengers meets the projection of 100 million per annum. A 3,000 hectare site is more than 50 per cent larger than the world’s busiest airport, Atlanta in the US which handles 104 million passengers per year. Atlanta Airport’s site covers 1,900 hectares and encompasses substantial commercial development including more than 200 concession outlets such as retail, food and beverages. The oversized proposed land area for Poland Central Airport could be linked to plans for an ‘airport city‘ or aerotropolis. A 1,200 hectare new city is envisaged, with hotels and showrooms. Under the government resolution outlining plans for the new airport legal and infrastructural changes to Baranów would allow for construction of business parks, conference centres, an exhibition centre and office complexes.

A government financed megaproject

The budget for the airport project, combined with the road and rail infrastructure, is estimated at between €7 – 8 billion. Polish citizens will bear the brunt of the enormous cost of the project; the main investor is the government. The 7th November 2017 resolution announcing construction of the airport approved the financing structure as well as the location. An article in the second 2017 edition of Airport Development News, an industry newsletter published by Airports Council International, stated that two state-owned financial institutions, Polish Development Fund (Polski Fundusz Rozwoju – PFR) and Bank Gospodarstwa Krajowego (BGK), Poland’s national development bank, would be ‘heavily involved’ in financing the project.

Possibilities for European funding have been considered. The Airport Development News article states that between 75 and 80 per cent of airport construction will be financed by international institutions such as the EIB (European Investment Bank) and EBRD (European Bank for Reconstruction and Development). Such investment by the EIB and EBRD is doubtful as state aid rules preclude allocation of EU funds for construction of the airport. But a June 2017 article published by legal analyst firm Lexology stated that EU funds could be tapped for the road and rail elements of the project. The total cost of the rail infrastructure elements of the megaproject complex is estimated to be between €1.89 billion and €2.1 billion, the total cost of roads and highways between €424,000 and €1.6 billion.

Uncertainty over accessing EU funds has led to attempts to secure financing from Chinese sources. The airport was one of the vast transportation and energy infrastructure projects discussed at the May 2017 Summit of the Belt and Road in China, where the President of China repeated assurances about new credit lines by China Development Bank and China Exim Bank, and one of the outcomes was signing of a contract between Polish and Chinese state railways on facilitating container transport. The Asian Infrastructure Investment Bank (AIIB), a multilateral financial institution supporting construction of infrastructure in the Asia-Pacific region, is reported to have expressed an interest in co-financing the Poland Central Airport project, if it is in line with the bank’s policy of promoting ‘interconnectivity’ between continents, which would mean that the airport would have to promote passenger traffic with Asia. Potential benefits to Chinese exporters from the airport are evident. The project would support the Polish government’s intention to establish the country as a port of entry for Chinese goods into the EU single market.

Industry experts doubt feasibility of the new airport

Some industry experts are critical of the new airport, doubtful that a new global hub could compete with established European hub airports such as Schiphol and Frankfurt and saying that it would struggle to meet its traffic projections and fail to make a profit. And adoption of Poland Central Airport as a government priority reverses many years of sloughing huge sums of public money into several new small regional airports. A major new hub airport would compete with these regional airports, many of which are already struggling with low passenger levels and unprofitable. Some industry experts warn that opening a new hub airport would be likely to lead to the closure of several existing Polish airports.

Expenditure on a new airport that results in closure of established regional airports would be an astonishing waste of public funds. Between 2007 and 2015 Poland sank at least US$1.58 billion into building and expanding 14 regional airports, with 40 per cent of this funding coming from the European Union (EU). This was highlighted in a report Flights of fancy: A case study on aviation and EU funds in Poland published in 2012 by CEE Bankwatch Network which critiqued the development and operation of small regional airports which were not financially viable, placing a strain on regional and local government budgets, along with allocation of EU funds for rail connections to airports, arguing it should be redirected to serving mobility needs within regions.

Aviation industry consultancy CAPA (Centre for Aviation) reports that Poland Central Airport would replace Warsaw Chopin Airport, the city’s main airport located south of the city with limited room for expansion. Bloomberg also reports that, under the government plan for the new airport, Warsaw Chopin Airport would eventually be shut down. Closing Warsaw Chopin Airport would be a woeful example of enormous waste of public funds and short-sighted planning. A major, multi-million Euro programme of upgrades to Warsaw Chopin Airport, increasing its capacity to 10.4 million passengers per annum, was completed less than a year ago, in December 2016. The terminal was modernized including installation of new check-in desks and an observation deck, a new long-range fuel pipeline constructed and the runways, taxiways and apron have been upgraded. The airport upgrade programme cost €166,760,000 with the EU Cohesion Fund contributing €32,900,000.

Rafal Milczarski, CEO of Poland’s state-owned carrier, LOT Polish Airlines, has said that Warsaw Chopin Airport should be closed down and the land sold to real estate developers to help finance the new airport. This would certainly benefit LOT, a leading proponent of the central airport. Indeed, supporting growth of the national airline is part of the rationale for the project. But the role of LOT in the new airport is a factor in skepticism regarding its viability. LOT is a relatively small carrier with fewer than ten wide-bodied aircraft. A high level of investment would be required for LOT to become one of Central Europe’s main carriers, one of the goals of the the airport project. Critics are of the opinion that the LOT lacks the scale and financial capacity necessary for commercial viability of the new airport project. LOT Polish Airlines also has a history of government intervention to support ailing finances. The carrier was a direct beneficiary of state funds in 2012-2014 when it was rescued from bankruptcy with a €200 million state bailout.

There are serious doubts over the viability of the Poland Central Airport project. The only certainties are vast public expenditure on infrastructure and loss of a large area of farmland.

Nijgadh aerotropolis – 2.4 million trees could be felled, and 7,380 people displaced

Rose Bridger Forests, land rights, Nepal , , , , , , , , , , , , , , , , , , , , , , ,

An 80 square kilometre aerotropolis is planned in Nijgadh, Nepal. The projects entails displacement of 7,380 people and felling of 2.4 million trees.

A major aerotropolis is planned in Nijgadh, in the Bara District in southeastern Nepal, 175 kilometers south of Kathmandu. If the megaproject proceeds as planned as many as 2.4 million trees will be felled, and 7,380 people living in the Tangiya Basti settlement within the site will be displaced. The government has repeatedly stated that Nijgadh Airport with a 80 square kilometer site, will be the largest, by area, in South Asia. An airport city adjoining the airport is planned. The map below shows the proposed Nijgadh Airport boundary as reported in the Nepal Gazette on 5th June 2015. The site is between two braided rivers, Pashah to the west and Bakiya to the east. The northern boundary is the Mahendra Highway between the two rivers. Most of the site, about 90 per cent, is densely forested land, predominantly consisting of Shorea robusta trees, which are also known as Sal or Sakhua. The settlement in the middle of the airport site, where about 7,380 residents living in 1,476 households face eviction, is called Tangiya Basti.

Nepal - proposed boundary of Nijgadh Airport, an 80 square kilometre aerotropolis
Nijgadh Airport site boundary , as described in Nepal Gazette, 5th June 2015

A series of government announcements underlined determination to pursue the project. In June 2014 the government emphasized determination to attract investors, reportedly ‘preparing to complete the pre-construction works to spare the investors all the hassles whether the government, private sector or foreign investors invest on the project’ as preparations were being made to fence off the land. January 2016 saw another high level push to commence construction of Nijgadh airport. The Ministry of Culture, Tourism and Civil Aviation (MoCTCA) was instructed to begin land acquisition, site clearance and resettlement of affected people and the Ministry of Soil Conservation was directed to fell trees and clear the site for the construction of primary and access roads to the airport site within two months.

It appears that a confirmed investor in the airport has proved elusive. Public funds will be used to develop the project. On 24th May 2016 the government allocated US$46.4 million for the construction of Nijgadh Airport, for land acquisition, resettlement of displaced people, environmental impact assessment and preparation of a detailed project report. The Tourism Minister said the project would be developed in phases, beginning with a single runway facility with capacity for 20 million passengers annually, with the accompanying airport city to be constructed at a later stage. In January 2017 the government assigned preparatory work on Nijgadh Airport to the Nepal Army, tasking it with building a perimeter road and an access road to the area earmarked for the runway, and clearing trees to make way for construction.

600,000 trees could be felled to fund Nijgadh Airport construction

By May 2017 forest earmarked for Nijgadh Airport remained unfelled, but vast numbers of trees could be transformed from an obstacle to airport construction into a source of funding for it. A news article entitled ‘Money grows on trees for Nijgadh airport project‘ reported a statement by officials that a vast swathe of the forest, about 600,000 trees, will be felled for the airport. The market value of the lumber was estimated at nearly US$581 million, which would be sufficient to pay for half of the US$1.172 billion construction costs for the first phase of the airport. The Forest Ministry permitted the Tourism Ministry to conduct an EIA (environmental impact assessment) on the condition that 25 trees are planted for every tree that is cut down.

Tourism Ministry officials pointed out that tree planting on this scale this would be difficult to implement, as felling 600,000 trees would require the planting of more than 15 million saplings. The suggestion that 15 million trees could be planted is more than merely ‘difficult’; it is completely unfeasible. Any such mega tree plantation could not replace the rich biodiversity of an long-established forest ecosystem and an enormous land area would be required, inevitably entailing the wholesale obliteration of an existing ecosystem in order to plant such a huge number of trees.

2.4 million trees could be felled for 80 square kilometre aerotropolis

Subsequent announcements in July and August 2017 threaten the felling of even more trees for Nijgadh Airport, over 2.4 million, to make way for the full 80 square kilometer aerotropolis. The first phase of the airport will spread over between 1,000 and 2,000 hectares, and CAAN has assigned the Nepal Army to clear trees at the airport construction site and to build access and perimeter roads. The government has allocated US$14.6 million for the project this fiscal year with CAAN setting aside an additional US$29.2 million to pay for initial works, if required.

A short video of the forest at risk of being destroyed for Nijgadh airport was posted on Twitter, by Milan Dhungana, who commented: “It’s very hard to believe that this beautiful dense forest is soon to be vanished to give way to a new airport.”

Photos of the forest that is at risk of being felled were also posted on Twitter:

7,380 people face displacement

Residents of Tangiya Basti, 7,380 people living in the settlement in the midst of the forest land earmarked for Nijgadh aerotropolis, face displacement. In June 2014 MoCTCA was attempting to settle disputes over compensation for land acquisition and people’s demands for resettlement arrangements. By March 2016 the task of collecting land details had been completed, with land valuation about to commence, along with issuing public notices for land acquisition. Land had been categorized as under individual ownership, public land and ‘unidentified ownership’, the majority belonging in the latter category. A video shows the Civil Aviation Authority of Nepal (CAAN) sign erected at the Nijgadh Airport site.

A 35-day notice was published for landowners to apply for compensation in March 2017. The amount of compensation for land acquired for the airport had been confirmed and the notice required landowners to harvest their crops within a month, prohibiting them from cutting any trees or plants. But compensation is only available to a minority of residents who have recognized land ownership. A September 2016 project report by Tourism Secretary Prem Kumar Rai stated that 110 households were eligible for compensation, with between 80 and 85 of these households agreeing to the compensation and the remainder reluctant to accept the government’s offer. The majority of residents facing eviction, about 1,400 households, have been categorized as ‘squatters’. Chief of the airport project, Hari Adhikari, said that nothing had been done to resettle the ‘squatters’ living on the construction site. In July 2017 the Himalayan News Service reported that the government’s preparations to acquire land for Nijgadh Airport had left residents of the Tangiya settlement, about 7,380 people, fearing their displacement and in a state of panic over their resettlement.

Tangiya Basti residents are struggling for new homes and livelihood opportunities. The Tangiyabasti Stakeholders Committee stated that construction of the airport had made their future uncertain and held a press conference where they demanded rehabilitation. Residents facing eviction are insisting upon replacement land and food supplies, provision of water, electricity and education in the place where they will be relocated, and one job for each of the affected families. Chair of the Tangiyabasti Stakeholders Committee, Ramesh Kumar Sapotka, said that they would refuse to vacate the area unless their demands were addressed.

Tangiya Basti residents have been living in limbo for years, knowing they face eviction for the long delayed airport, which was proposed 20 years ago. The settlement was established by the government for flood victims in 1975 and the majority of people living there are from the marginalized Tamang ethnic group. For more than 40 years the government has failed to fund essential services for their established settlement, or to support their own efforts to develop these services. Tangiya Basti residents lack electricity, a reliable drinking water supply, electricity and roads. Construction of schools has been cancelled leaving pupils with a dangerous seven kilometer walk through dense forest to get to classes, with the risk of being trampled on by wild elephants that roam freely in the area. Many locals have to go to a neighboring town to make telephone calls and walk for several hours to reach healthcare facilities.

Fast-track to destruction

A 76 kilometer road, a ‘fast-track highway’, linking Nijgadh Airport with Kathmandu, has been on the drawing board since 1996. Reducing the travel time to the capital city to one-hour, is considered essential for the feasibility of the airport, but the road megaproject has also been plagued with delays. A Detailed Project Report (DPR) for the ‘fast-track’, a four-lane mega-highway, crossed by seven bridges and expanding to six lanes, was completed in August 2015.

Preparatory work for construction of the road was fraught with technical problems. The Nepal Army began excavation works without regard to the specifications for a four-lane expressway and the challenges of construction works on steeply sloping terrain, which could cause landslides. After years of delays the foundation stone for the expressway was laid on 28th May 2017, and the project handed over to the Nepal Army which will oversee construction. In the interim the road has fallen prey to the cost escalation common to megaprojects around the world. Over a seven year period the estimated construction cost of the expressway has doubled to over US$1 billion.

Megaproject mania, misplaced priorities

The Nepal government’s relentless pursuit of Nijgadh Airport and the fast-track continues in the face of criticism that the projects are draining funds from other regions of the country.  Meanwhile, other megaprojects languish incomplete and have fallen far behind schedule, such as a 28 kilometer tunnel to bring water from Melamchi to Kathmandu and transmission lines. Massive deforestation looms to clear the designated site for the airport even though funding for construction has not been secured. Successive administrations have put forward different plans for financing Nijgadh Airport. As late as August 2017 no decision has been made on funding. Two financial models have been put forward. BOOT public-private partnership (PPP) would involve foreign investment or private financing. Alternatively, the government would develop the project under the engineering, procurement, construction and finance (EPCF) model.

Megaproject mania, in particular massive government expenditure on a gigantic airport, multilane highway and aerotropolis, is a serious case of misplaced priorities in one of the world’s poorest countries. Nepal is still reeling from a devastating earthquake on 25th April 2015 which killed nearly 9,000 people and destroyed over 700,000 homes. Political infighting has delayed reconstruction and, in spite of billions of dollars pledged in aid, outside of Kathmandu the majority of affected families are still living in desperate conditions, in tents or makeshift shelters, enduring harsh winter weather and heavy monsoons. In these circumstances, spending vast amounts of public money on a mega-airport that would displace over 7,000 people is nonsensical.