Polish airport operator escalates terminal war with Ferrovial

By bne IntelliNews November 1, 2007

Jan Cienski in Warsaw -

Anyone flying out of Warsaw is in for a peculiar form of torture - while lining up inside a small and overcrowded terminal to leave the Polish capital, they can glance next door at a gleaming and completed new terminal that they are not allowed to use.

The new terminal, built by a Polish-Spanish consortium of Spain's Ferrovial, its Polish subsidiary Budimex and the Estudio Lamelo architecture firm, is essentially finished and just needs the go-ahead from the fire department to open for traffic. But despite months of effort it has not been able to receive the needed certification - a situation that's unlikely to change following the recent decision by Polish Airports (PPL), the state-owned company that owns Warsaw's Chopin airport, to tear up its agreement with the consortium.

The PPL cites a series of delays in completing the work as reason to annul the contract, and on October 30 demanded payment of $8.66m in bank guarantees from Budimex. In retaliation, the company has said it will challenge the decision in courts, calling it "unwarranted and improper" and has pulled its workers from the site.

"The reasons why Terminal 2 has not yet been opened are due to circumstances beyond our control," the consortium said in a statement following PPL's October 12 decision.

The result is likely to be even more delays in opening the terminal, which has been plagued by problems ever since it was first conceived five years ago. The main problem with the new terminal is that PPL tried to build it on the cheap, accepting a bid from the consortium of $198m, $60m less than the next highest offer. In an annex signed soon afterwards, the price of the terminal was increased to $247m.

The terminal was initially supposed to be ready in November of 2005, then in early 2006, and finally in June of this year. Since then, PPL has been charging $70,000 a day for every day the opening is delayed; the consortium is refusing to pay, instead asking for more money to complete the project.


The biggest losers in all this are likely to be long-suffering passengers and flag carrier LOT Polish Airlines.

Poland is Europe's fastest growing airline passenger market. In the first nine months of this year, the number of people flying out of Polish airports increased by 24%, and the total number of passengers in 2007 is expected to be about 19m. In 2006, the number increased by 33%. The main driver has been Poland's entry into the EU and the explosive growth in low-cost airline connections with Western Europe, most of which serve the millions of Poles who have moved west to find work.

The largest airport in the country is, of course, Warsaw, which last year served 8m passengers and this year could see as many as 9m. All of those people have to use the current main terminal, opened in the early 1990s and designed to handle 3.5m people a year. The less fortunate have to crowd into a barracks next to the main terminal that serves low-cost fliers. During peak times, passengers have to wait outside because there is so little space inside.

Even when the new terminal finally opens it will be able to handle only 6.5m passengers a year, which together with the old terminal gives the airport a capacity of about 10m passengers - more or less how many people currently fly out of Warsaw, leaving no capacity for future growth.

While both sides battle it out, Warsaw area passengers are shifting to other regional airports - Poznan's passenger traffic increased by 130% last year and Lodz's grew by 80% - making Warsaw airport's hopes of becoming a regional hub look evermore distant.

That is a growing problem for LOT Polish Airlines, which is trying to survive as a smaller European airline by beginning to offer longer range point-to-point flights and had hoped to use Warsaw as a hub.

Meanwhile, LOT's partners in the Star Alliance, Lufthansa and Austrian, are funnelling Polish passengers into their own hubs in Vienna, Munich and Frankfurt. "Warsaw could lose these passenger for good," warns Adrian Furgalski, a transport analyst for TOR, a Warsaw-based consultancy.

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