Zagreb Airport operator to seek concession fee cuts

Zagreb Airport International Company (ZAIC), which runs Zagreb Airport, will request for the Croatian government to lower its annual concession fee, the "Slobodna Dalmacija" daily reports. According to the newspaper, the airport's General Manager, Jacques Ferron, announced the plan last week. The operator argues that as a result of the concession fee, it was forced to increase its charges. which has in turn deterred low cost airlines from flying to Zagreb. This winter season, only one low cost carrier, Eurowings, will maintain services to the Croatian capital. However, it too noted last year that Zagreb Airport's charges are "significantly higher than most major European airports, making it less appealing for low cost carriers". Croatia's busiest airport hiked its fees following the opening of its new passenger terminal in 2017 by two euros per each international passenger for a total of seventeen euros. Similarly, it increased its fees by half a euro per every domestic passenger to seven and a half euros.

In practice, concession fees applied to airports are passed on to airlines and their passengers through artificially higher charges, making airlines and passengers pay more than their fair share of airport facilities and service costs. Nonetheless, governments do not provide additional services in return for these concession fees. The Croatian government has said it is yet to receive an official request from Zagreb Airport's operator for the reduction of the annual concession fee. "We have not received a request from Zagreb Airport International Company to reduce the concession fee and neither have we discussed it with them. The concession fee is determined based on the agreement signed between the government of Croatia and Zagreb Airport International Company. ZAIC, as the concessionaire, has so far met all of its obligations, not only in terms of making the concession fee payments but also through continual passenger growth and the introduction of new destinations", the Minister for Sea, Transport and Infrastructure, Oleg Butković, said.

ZAIC's concession fee is made up of a fixed and a variable charge. The fixed charge amounted to two million euros in the first year of the concession and will increase to twelve million in the 29th year. The variable charge fluctuates based on the overall gross revenue. It becomes payable from the third year of the concession and totals 0.5% of the total gross profit, after which it grows to up to 61% of revenue in the 30th (last) year of the concession. The International Air Transport Association (IATA) is in favour of removing rent and concession fees airports are paying to governments, as it believes it will benefit all stakeholders - governments, airports, airlines and the paying passenger. "Airport charges should be related to the cost of providing airport facilities and services and airlines should not bear more than their fair share of the costs. Consequently, airlines and their passengers should not be requested to cover rent and concession fee costs for which they receive no service in return. A decrease in the level of aviation charges and ticket prices will have a substantial positive impact on a country’s aviation and tourism industry. The growth in air traffic, tourism and economic activity related to lower aviation costs alone will significantly benefit a country’s economy and off-set any reduction in direct revenue from rent or concession fees", IATA notes.