AIRPORT FOR RENT

Azerbaijan has long been a pioneer of the Caspian region in terms of the number of modern airports in the provinces. Air hubs are being built in the liberated territories, and an air terminal will soon be established in the Alat FEZ. Also, the government is exploring the possibility of transferring one of the regional airports into a long-term lease to attract a low-cost foreign airline. This practice is quite widespread internationally. Maintenance of the infrastructure of small airports, which are not busy with regular flights, is very expensive for the state budget, so more than half of the existing regional airports in the world are leased to private companies.

International experience

The leasing or partial privatisation of airports can take various shapes. Formerly state-owned airports in Denmark, Austria, Switzerland, Belgium and New Zealand have been sold to private investors. Airports in Argentina, Australia, Costa Rica, Peru, Greece and Costa Rica have been successfully operated under long-term leases. An early form of privatisation is the construction by individual airlines of their own terminals at airports in New York, Atlanta, Dallas, Houston and other US cities.

By the way, it is in the US that the largest number of small and medium-sized airports in the world is located today. Their total number reaches 19,000, but only 5,000 of them have a hard-surfaced runway. Only 380 major American airports serve scheduled air services, and all of them are owned by the state. At the same time, 138 key airports in major US metropolitan areas account for about 95% of total passenger traffic. Of course, there is no question of complete privatisation of large state-owned airports. Up until 1996, the denationalisation of airports in the US was forbidden by law. Most privatisation schemes are hybrid in nature, with the government retaining a significant share of ownership. The most common forms of privatisation are partial sale or lease of airport public assets.

So what is happening to the more than 18,600 small and medium-sized airports in America? This country has long ranked first in the world in leasing small public airports to private firms (auto-sourcing) and privatising certain existing business facilities. Warehouse premises in American regional airports are massively leased out, and private business is engaged in retail trade, catering, hotel and other services. Moreover, the profit from rent is mostly spent on capital construction, production needs and reduction of fees from airlines. Due to this combination of lease and privatisation mechanisms, US regional airports with little involvement in scheduled flight services can stay afloat by recouping infrastructure maintenance costs, as well as through lower fees and service rates. This regime is attractive to commercial cargo flights, charters, low-cost carriers and, of course, small aircraft.

Britain has been following a similar path for a long time. It is recognised as the most liberal country in Europe in terms of aviation legislation, with the highest rate of denationalised airports. The leading positions here are held by the private British company BAA (British Airports Authority), which manages London's Heathrow, Standsted and Gatwick airports, as well as Southampton, Edinburgh, Glasgow, Aberdeen and several airports in the US and Italy.

Türkiye's second largest airport is leased to an Indonesian company, while a number of Georgian airports are leased to Turkish companies. In Russia and other post-Soviet countries, steps are taken to lease out the underutilised regional airports. In particular, since the end of 2023, Kazakhstan has held negotiations with international investors on the transfer of three airports in Aktobe, Turkestan and Kyzylorda into trust management. As noted by the Kazakh Minister of Transport, Marat Karabayev, the goal is to create multimodal cargo-centres, which will attract private investors with the necessary competencies and capital. Currently Kazakhstan's largest airport in Almaty is managed by the Turkish holding TAV Airports. In addition, last autumn Kazakhstan signed an agreement with a group of companies Terminals Holding (UAE) on cooperation on the development of Astana airport as a multimodal hub.

Rationalisation proposal

Azerbaijan is planning to implement all this extensive international experience of public-private partnership in the aviation sector too. The government is going to lease one regional airport (and more if the experience is successful) to attract an international low-cost carrier. Last autumn, during the discussions of the bill on aviation, MP Rufat Guliyev suggested speeding up the process of transferring airports to private management. "55 per cent of the world's airports are leased out. Using this experience in Azerbaijan would help create new jobs in idle regional airports," he said.

Apparently, the government is determined to liberalise the civil air transportation. Several proposals have been prepared in this regard. "There are a number of airports operating in the regions of Azerbaijan. We propose to transfer one of them to a foreign company or to attract some additional company and form a local management there," Deputy Head of the State Service for Antimonopoly Control and Consumer Market Supervision Jafar Babayev said at a press conference on the results of the agency's activities for 2023. He expressed hope that in the future this proposal will be implemented and citizens will be able to buy air tickets at a lower price.

This step is also welcomed by Azerbaijan Airlines (AZAL), which is the actual owner of regional airports. As to the prospects of their development, Director of the Heydar Aliyev International Airport, Teymur Hasanov, said attractive conditions have been worked out for the development of this direction and favourable offers will be presented to operators. "We are actively working on turning our regional airports into base hubs for foreign airlines. Therefore, we continue to hold negotiations with Wizz Air, Pegasus and Flynas," he noted, emphasising that this is a realistic prospect. One airline can accommodate an average of about five aircraft in regional airports.

The use of international experience in leasing regional airports may be the best option for development, as their level of involvement in air transport is extremely low today.

There are 8 international airports in Azerbaijan, 7 of which are in the districts. As for the Heydar Aliyev International Airport, the country's largest aviation hub, it serves more than 15,000 passengers daily. In 2023, passenger traffic at the airport increased by 33%, reaching a record 5.85 million passengers.

Indicators at regional airports are much more modest. For example, last year the Nakhchivan International Airport served 744K, Ganja 218K, Lankaran about 16K passengers. The operation of the airport in Gabala is largely related to seasonal factors. Passenger traffic at the recently built airports in Fuzuli, Zangilan and Khojaly is still very insignificant. Thanks to busy airports in Baku, Nakhchivan and Ganja, the state of Azerbaijan subsidises the maintenance of other airfields, covering the costs of maintaining infrastructure, staff salaries, etc. at these facilities.

One of the ways to achieve the greatest effect from leasing out regional airports is to sign agreements with international low-cost airlines. Most of the low-cost airlines' flights are carried out through Baku. Last year, the Ministry of Digital Development and Transport added WizzAir Malta, Flyadeal, Air Cairo and Georgia Wings to the list of low-cost airlines operating in Azerbaijan. It is likely that in 2024 the number of affordable carriers will increase, with IndiGo (India), Aegean Airlines (Greece) and Air Arabia Abu-Dhabi (UAE) flying to Baku as well. If Azerbaijan relocates some low-cost carriers to regional airports of the republic, and offer them preferential treatment in terms of fees, service, and fuel prices, it can create air hubs of international level in a very short period of time.

According to AZAL, new air carriers are to be attracted to the international airports of Azerbaijan as part of the fifth and seventh degrees of freedom of air in the country. These options give them equal rights with Azerbaijani airlines and the possibility to perform transit flights through local airports. 

New airports

At the same time, the government is not planning to abandon the development of regional airports, especially in the liberated territories of the country. This direction is considered as strategically important and in line with the security of the republic. The need to form an extensive aviation infrastructure in the south-west of Azerbaijan is related to a number of objective factors. It will enable convenient and fast transport communication with the rest of the world, becoming the most important transit element complementing the land communications of the future Zangezur corridor. The complex military-political situation should not be ignored either. The availability of hopping aerodromes here, capable of receiving heavy military transport aircraft, will be useful. Moreover, without a well-developed short flight path, it is simply impossible to receive foreign tourists on a mass scale, which is intended to become a key element in the development of the recreational potential of Garabagh and eastern Zangezur. These arguments motivate the government to invest tens of millions of manats in the construction of international terminals in Fuzuli and Zangilan. An airport in Lachin is expected to open in late 2025, and in the longer term the possibility of building another airport in Aghdam is being explored.

The newly established airports in Fuzuli and Zangilan are equipped with modern air navigation systems from the world's leading manufacturers. These facilities make use of state-of-the-art ILS/DME instrument landing systems, VOR/DME en-route aircraft navigation aids, automated aviation and meteorological observation systems, primary and secondary radar systems. The runways are designed to accommodate heavy airliners. All this makes it possible to conduct flights in accordance with the safety standards of the International Civil Aviation Organisation and the International Air Transport Association. The above facts are another proof for future tenants of the attractiveness of Azerbaijan's regional airports and their readiness for commercial operation without the need for additional large investments in infrastructure.