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Bulgaria To Become Regional Air Leader Amid Privatization Plans

March 24, 2004

(Balkanalysis.com Research Service)- As Bulgaria’s European integration program grows ever stronger, the country is trying to cement its status as a regional transportation and tourism hub. New international investment interest shows that this plan is bearing fruit, while the World Tourism Organization lauds Bulgaria’s recent successes as a tourism draw.

On 21 March, the Sofia Morning News reported that the German government will back Bulgaria’s efforts to become “…a regional centre for air traffic control.” This likelihood received confirmation over the weekend with the visit of Bulgarian Minister for Transportation Nikolay Vassilev to Germany. Vassilev met with his German counterpart, Manfred Stolpe, who suggested that German air traffic control experts visit Bulgaria soon to follow up on the details of the proposal.

It comes just as Bulgaria is upgrading its air traffic control system to conform to standards set by the European Organization for the Safety of Air Navigation (EUROCONTROL). An Italian company, Alenia Marconi Systems, is responsible for providing the new system, which underwent preliminary trials earlier this month. According to the report, Italy’s work here comes “…due to its interest in the privatisation of Bulgaria Air.”

More specifically, the Italian air carriers Air One and Volare have shown “considerable” interest in the state-owned Bulgaria Air, which is set to be privatized. This interest was reiterated in Monday’s meeting between Transport Minister Vassilev and Italy’s Adolfo Urso, deputy minister for Productive Activities. In addition, enhanced connections on existing routes are also being sought. According to Urso, Italian flagship carrier Alitalia wants to have 4 regular weekly flights between Sofia and Milan. Bulgaria Air also is planning to launch Milan-Sofia flights as well, says Vassilev.

However, there are some holdups to progress. There are fears that Sofia Airport’s construction of a new runaway “is facing a break off.” Ironically, Bulgaria is feeling the backlash here from America’s trade war with the EU, which among other manifestations has included the dollar’s devaluation over the past year or so. Now, the contracting Kuwaiti-Arab consortium wants to revise the contract, “…since it was signed in March 2003 at a considerably higher US exchange rate.” The dollar has fallen from 2.20 Bulgarian leva to today’s 1.50 leva- meaning a big loss for the funders.

The consortium is made up of Kuwait’s Mohammed Abdulmohsin Al-Kharafi & Sons and the Arab Admak General Contracting Company. The former is run by Nasser Al-Kharafi, an industrialist perennially on Forbes’ list of the world’s richest people. The Bulgarian venture is not the Al-Kharafi’s first tourism/transport project. According to the magazine, Nasser and elder brother Jassim are “…trying to woo European tourists to their Disney-esque Port Galib on Egypt’s Red Sea coast, a project estimated at $2 billion.”

Kuwait has had long-term involvement with Bulgaria’s transport infrastructure. The Kuwaiti Fund for Arab Economic Development gave a $40 million loan in 1998 to build a new runway for Sofia Airport. This agreement was amended in May 2003 with the inclusion of “preparatory works and consultancy services,” inflating the loan amount to 40.078 million euro.

Yet the funds and thus work progress have been slow in coming, the government only ratifying the amended agreement in January 2004, resulting in the release of the first $1,700,000. But the problem of contract resolution spurred by the currency drop has yet to be resolved. Transport Minister Vassilev is expected to get negotiations underway on his visit to Kuwait next month.

Detailed descriptions of the planned Sofia Airport refurbishments can be found here.

The government has high hopes for the Bulgaria Air privatization. It is set to begin after parliament approves a strategy. Although a document regarding it was submitted to the Economy Ministry five months ago, reports the Sofia Echo, “…it has not yet been discussed.”

And while privatisation experts fear the process could take “many months,” “…the longer the period the better the chances of Bulgaria Air to become even more attractive [to foreign investors]. Last week, the Transport and Communications Ministry allowed the air carrier to lease more planes in order to meet increased demand from passengers.”

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