Turkey's Competition Authority to analyze tender for Istanbul's third airport

According to local daily Haberturk, based on a study by a private consulting firm, the Competition Authority will analyze the upcoming third airport tender in Istanbul within the context of the Competition Law. Reportedly, the procedure would be similar to the one that was...

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Turkey's Competition Authority to analyze tender for Istanbul's third airport



Erste - 06.12.2012

According to local daily Haberturk, based on a study by a private consulting firm, the Competition Authority will analyze the upcoming third airport tender in Istanbul within the context of the Competition Law. Reportedly, the procedure would be similar to the one that was exercised during the Gazipasa Airport tender, which was won by TAV Airports Holding.

According to the news, TAV would be in a more advantageous position in the upcoming tender if it gives up its current operating rights for Istanbul Ataturk Airport should the new airport become operational prior to 2021, say 2017. The news item also claims that Turkish Airlines may also consider bidding for the tender in order to benefit from vertical integration.

We disagree with the arguments mentioned in the news on the back of the following fact: According to Communiqu No. 1998/5 of the Competition Authority, the scope of the Communiqu is described as follows: "... determine the procedures and principles to be pursued in pre-notifications and authorization applications to be filed with the Competition Authority in order for acquisitions to be carried out by the Presidency of the Privatization Administration and other public institutions or organizations to become legally valid." Although it is not our professional expertise, what we understand from above statement and Communiqu in general, is that in order to apply to the Competition Authority for pre-notification and authorization, there should be an acquisition and/or transfer of rights for an existing facility. However, in the case of upcoming third airport, there will be a greenfield investment in the form of a Build-Operate-Transfer model. That is, there is no existing facility to be transferred to a winning party.

Moreover, in the Gazipasa example for which the Competition Authority performed an analysis, does not fit this case because there was already an existing airport in Gazipasa. Since the operating rights of an existing facility were transferred in that tender, the Competition Authority naturally intervened in the process and supplied its view.

Consequently, what we mainly argue is that the Competition Authority will not play a role in the upcoming tender and TAV's chance of winning the tender has nothing to do with discussions (or these discussions are irrelevant for TAV's chances of winning the tender.) Secondly, although we agree that Turkish Airlines could consider bidding for the third airport tender, we find it very unlikely. First, we have never come across any comments from Turkish Airlines' management about their intention for such an undertaking. Secondly, we would consider such an attitude, if any, to be value destructive for the company as we believe airport terminal operations is a totally different business, which requires extensive experience, a necessary qualified labor force and a different mindset in order to be successful.

We admit that these bottlenecks could be solved with some measures (such as teaming up with an experienced terminal operator),but we have concerns whether the difference between the gain from running an airport and costs incurred would be positive, or let us say meaningfully positive for Turkish Airlines. We refrain ourselves from making further comments about the issue for the time being, but our initial perception about such a move is negative as we prefer Turkish Airlines to maintain its full focus on its superb organic growth.

Source: bne


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