An alliance of Hassan Allam Holding and France’s Groupe Aéroports de Paris (ADP France) submitted a joint proposal earlier this week to manage and operate Egypt’s airports, according to a cabinet statement.

According to the statement, the alliance has requested to hold several workshops with officials from the Ministry of Civil Aviation to discuss details of the airports offering and exchange their visions regarding the possibility of any potential partnership as part of a privatisation scheme.

The ADP Group, which operates France’s three largest airports, is one of the leading entities in the field of airport management. The company has partnerships with 26 airports in 18 countries around the world and had contracts to work in several Egyptian airports in the early 2000s.

The alliance said it aims to increase airport capacity, facilitate passenger and cargo movement, and boost airport efficiency.

This is not the first foreign entity to express an interest in operating and managing Egyptian airports. Minister of Civil Aviation Sameh Al-Hefni held discussions in October with Greek infrastructure investment company the Copelouzos Group about potential joint projects to operate and develop the country’s airports.

Egypt has 23 airports, with the Cairo International Airport being the largest. The country aims to increase the number of passengers these airports receive annually to 72.2 million by the end of 2025, compared to 66.2 million at the end of last year, before reaching 110 million annually in 2030.

The offering of these airports to the private sector, according to observers, aims to create demand and support the growth of incoming tourism to Egypt as more than 90 per cent of Egypt’s tourism comes via air. Egypt plans to attract 30 million tourists by 2028.

A revival in the number of flights and passengers would encourage cargo companies to operate routes to and from Egypt, a means to increase trade in Egyptian goods and increase exports.

Putting the airports on the bloc is also part of plans to revive Egypt’s privatisation programme, one of the main reforms that the International Monetary Fund (IMF) has demanded as part of the augmented $8 billion loan agreement it finalised with Egypt in March.

This is in addition to foreign operators encouraging major carriers to launch direct flights to Egypt from US, European, and East Asian destinations. Currently, US flights to Egypt often stop over in Europe or Turkey, while East Asian carriers only operate indirect routes to the country.

In October, the International Finance Corporation (IFC), which the government has commissioned as an advisor to the privatisation programme, submitted a technical study and a proposed timeline to offer the management and operation of 20 airports, including four new ones, to the private sector.

While the first mention of state plans to privatise the airports came a year ago, details of the plans started to become public in the second half of 2024.

In July, unidentified sources told media outlets that the first phase of the airport offering plan would see Cairo International Airport, Sphinx International Airport, Alamein International Airport, Sharm El-Sheikh International Airport, and Hurghada International Airport offered to private operators.

In August, Al-Hefni said that the airports were not for sale and would remain under the ownership of the Egyptian state. According to the minister, the offering only involved the management and operation of commercial activities within the airports.

In such arrangements, called concession agreements, the government gives a private entity the right to operate the airports for a number of years, ranging between five and 40, in return for which it receives royalties from the operator.

Al-Hefni told reporters that the state was implementing an integrated strategy based on raising the efficiency of the country’s airports and increasing their capacity by embarking on several infrastructure development projects and enhancing the role of the private sector to attract more investments in the civil aviation sector.

He said that this is not new to the civil aviation sector, as Egypt has had successful experiences like it in Marsa Alam with the Build, Operate, and Transfer (BOT) system. In 2001, the EMAK Company affiliated to the Kuwaiti Al-Khorafi Group signed a 40-year agreement to build, operate, and transfer the Marsa Alam Airport.

Such concession agreements are one of three kinds of airport privatisation and are the most widely used worldwide. According to Aviation Learning, a website dedicated to explaining aviation-related news, after the completion of privatisation through a concession agreement a government removes itself from the day-to-day business of an airport and all management and administration activities.

“The private sector takes full control of airport management, administration, maintenance and even development. However, to preserve the public service element of airports, the government does incorporate some checks and balances in the concession or lease agreement to prevent the private sector from compromising public benefits of airports in pursuance of profits,” it noted.

Conditions put by governments in concession contracts include setting a ceiling on fees the operators can charge airlines for services or stipulating a minimum sum of investment the operator directs every year to development.

No official statement has explained what kind of services would remain under government control in the Egyptian case, but similar concessionary agreements keep some services like security, air traffic control, and aeronautical communication services and rescue, in state hands.

It is not clear if the management deal will include the right to operate subsidiaries of the Egyptian Holding Company for Airports and Air Navigation (EHAAN). EHAAN was established in 2001 as a state-owned enterprise that operates 20 airports via four subsidiaries: the National Air Navigation Services Company (NANSC); the Cairo Airport Company (CAC); the Egyptian Airports Company (EAC), and the Aviation Information Technology (AVIT).

The International Air Transport Association (IATA) in a report issued in June this year highlighted potential risks of airport privatisation, topped by the risk of conflict of interest if governments have to act as an approval entity for charge decisions while benefiting from airport revenues at the same time.

Operators may make up for the concession fees paid to the government by imposing higher charges on airlines and their passengers. “This can be considered as an additional tax on air travel, restricting economic growth and tourism,” it said.

IATA noted that a key determinant of the success of airport privatisation is the effective balancing of the interests of consumers, airlines, investors, and economies.

Achieving this balance requires governments to protect consumer interests by establishing robust regulatory safeguards to ensure cost efficiency in charges and improvements in investments and service levels, it added.

Moreover, there should be periodic monitoring of airport privatisation through public consultation, with corrective action taken to ensure benefits are realised for passengers, airlines, and cargo consumers.

“The success of the privatisation of airports must be measured by service levels, cost-effectiveness, and long-term economic viability and not by short-term financial gains for governments or investors,” the IATA report concluded.

* A version of this article appears in print in the 5 December, 2024 edition of Al-Ahram Weekly