The MoscowTimes, Thursday, May 11, 2006

The MoscowTimes, Thursday, May 11, 2006. Page 5.

State Prepares to Sell Sochi Airport

By Anna Smolchenko

Staff Writer

Viktor Klushkin / Itar-Tass

Overhauling Adler airport, pictured hours after the May 3 Armavia crash, would take large investments, experts say.

The government is gearing up to sell off Sochi's main airport as part of its plan to boost tourism at the country's main Black Sea resort.

The sale became possible after President Vladimir Putin signed a May 3 decree that excluded the airport from a list of strategic state assets. A copy of the decree was posted on the Kremlin web site.

Coincidentally, the decree was signed in the hours after the Armavia airplane tragedy, in which an Airbus A-320 crashed in the Black Sea as it approached the airport, killing all 113 people on board.

"The main task is to attract strategic investments into [the airport's] modernization and completion," Igor Kochukov, an official with the Economic Development and Trade Ministry in charge of preparing state property for privatization, said on Wednesday.

Vedomosti on Wednesday cited Igor Grechukhin, a senior official at the ministry, as saying the state would sell 100 percent of the airport, which is known as Adler Airport, for the town where it is located.

Contacted Wednesday by telephone, however, Grechukhin pointed out that the state would probably want to retain some of the airport.

"If worst comes to worst, we'll secure a golden share," Grechukhin said, referring to a nominal controlling share in a state company that has been privatized.

Grechukhin told Vedomosti the airport would be transformed into a joint-stock company within six months.

Kochukov said Wednesday that the airport was unlikely to be sold off this year.

Boris Rybak, head of aviation consultancy Infomost, said the decree was the result of lobbying by a company looking to snap up the airport, but added that on purely economic grounds it was not as attractive as a larger transit hub would be.

"It's not as good as they would like us to believe," Rybak said. "It's a small airport that doesn't have any further ambitions."

With 1.2 million passengers in 2005, Adler was the sixth-largest airport by passenger turnover in European Russia, according to Infomost.

Viktor Gorbachyov, general director of the CIS Airports Association, said Wednesday that billionaire Oleg Deripaska was the most likely bidder for the airport. With Adler, Deripaska would "encircle the North Caucasus," Gorbachyov said.

Deripaska currently owns airports in Anapa and Krasnodar and is building an airport in Gelendzhik.

The 1950s-era Sochi airport is in poor condition and will require between $50 million and $60 million in investments, Gorbachyov said. Up to $15 million of that amount would be needed to complete an unfinished terminal whose construction was halted in the early 1990s, he said.

The Kremlin is backing Sochi's bid for the 2014 Winter Olympics. With an eye on the Games, the government earlier this year approved a $11.7 billion plan to turn the area into a year-round mountain and Black Sea resort. The government is hoping the annual flow of tourists to Sochi and the surrounding mountains will triple to 6 million by 2015.

A spokeswoman for Russian-Asian Investment Company, an investment fund in which Deripaska is an investor, confirmed the fund's interest in the airport, but declined to comment further.

Other potential bidders include Aviation Oil Company, or ANK, and billionaire Viktor Vekselberg, who co-owns Yekaterinburg airport, Vedomosti and Kommersant reported Wednesday.

A director of ANK, Vnukovo Airport first deputy director Vitaly Vantsev, confirmed ANK's interest in the Sochi airport, the papers said.

Sources at Vekselberg's Renova holding confirmed the interest, Kommersant reported.

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