First, planning errors and problems with the fire safety system pushed back the opening of Berlin's new international airport by nine months. Now, the project faces significant financial problems. The planned opening date in March 2013 could be in jeopardy.
The lettering on the eye-level, flat-screen monitors is razor-sharp, with nothing flickering at all as the lines scroll down displaying departing flights: 3:00 p.m., Air Berlin 8308 to Helsinki; 3:05 p.m., Lufthansa 2737 to Düsseldorf; 3:10 p.m., Air Baltic 218 to Riga. According to the monitors, there are 30 departures within an hour, and every flight is on time.
Air traffic is running very smoothly at the new Berlin Brandenburg International Airport, at least according to the monitors in the brand-new terminal. They show fictitious departures and arrivals, but they are about the only thing that works at the airport. Cables are dangling from the ceiling in the check-in areas, construction debris is piled up in front of the Air Berlin lounge, and in the restrooms, pipes are protruding from the tiled walls where sinks and toilets have yet to be installed.
Airport developers are touting it as "Europe's most modern airport," and the facility was originally scheduled to begin processing about 70,000 passengers a day following the planned June 3 opening date. Instead, it seems as if crash pilots from the days of "Those Magnificent Men in Their Flying Machines" have taken over the management. On Friday, Berlin Mayor Klaus Wowereit and Brandenburg Governor Matthias Platzeck will tour what's left of their vision, together with the new airport's board of directors. In the wake of chaotic planning and technical glitches, the airport's opening has been delayed until next spring. And it now threatens to turn into a financial debacle.
The continued operation of Berlin's two older airports, Tegel and Schönefeld, is expected to cost 150 million ($189 million) alone. Lost revenues at the airport hotel, the neighboring Airport Center office complex and the parking facilities will likely amount to another 80 million. And then there are the unplanned cost overruns for terminal construction and soundproofing, as well as yet-to-be-determined damage claims from companies like Air Berlin, which had to cancel its new hub model temporarily, and Deutsche Bahn, which has to operate empty trains every day to keep the airport tunnel ventilated. Many smaller service providers are also complaining about revenue losses.
On the Verge of Financial Failure
The delay was predicated on problems with the facilities fire safety equipment. Now, the airport's operating company is now on the verge of financial failure. Without a quick injection of taxpayer money, the additional costs of several hundred million euros could send it into bankruptcy. "Without clarity with regard to costs, the planned opening date in March 2013 cannot be adhered to," warns Ramona Pop, Green Party floor leader in the parliament of the city-state of Berlin.
The fact that politicians and managers of the new airport wanted the airport to be so many things at once -- prestigious, quickly built and relatively inexpensive -- is now taking its toll.
Berlin, Brandenburg and the federal government were prepared to pay only 430 million when construction began six years ago near the town of Schönefeld. The airport operating company planned to pay the remainder of the estimated 2 billion price tag with its own funds and private capital -- at a time, in 2006, when there was still unlimited confidence in the markets.
The excavating machines already turned up before the actual financing was in place. Money was no object. After building its stylish main train station, Berlin finally wanted to have its own futuristic airport, hoping to show the world what a modern city it is. The airport operating company decided to do without a chief financial officer, a task that the construction manager at the time, a former executive with construction giant HochTief, assumed in addition to his regular duties.
To ensure that work could begin quickly, the airport operating company borrowed 350 million from a banking syndicate headed by Commerzbank in July 2006 -- a loan with a short term and a high probability of changing interest rates, known as the interest-rate risk.
Interest Rate Gambles
The financing was finally wrapped up about three years later, but it wasn't what Platzeck and Wowereit had expected. In the fall of 2008, in the middle of the financial crisis, banks were only willing to lend money if the federal government and the Berlin and Brandenburg governments issued a virtually all-encompassing loan guarantee.
A 100 percent guarantee was rushed through the state parliaments in Potsdam and Berlin, as well as the federal parliament, the Bundestag. Instead of the 430 million the original plans had called for, the public partners were forced to guarantee a 2.4 billion line of credit.
As with the construction planning in general and fire safety problems in particular, mistakes and trickery also accumulated during the budgeting process. In 2006, for example, airport management embarked on risky 20-year interest-rate gambles that were in fact meant to hedge the financing. After earning initial profits, these so-called swap transactions went into a sharp decline. The airport operating company, in a settlement of sorts, paid the banks 28 million in March to avoid future swap risks.
At the same time, the costs of the new terminal had risen dramatically. Instead of 620 million, it is now expected to cost twice as much, as Platzeck recently admitted in Brandenburg state parliament.
Officials must have long been aware of this cost increase. Already back in November 2007, an expert hired by HochTief calculated that with the budget in place at the time, "neither the quantitative (area) nor the qualitative (expansion standard) requirements" could be met. Based on an analysis of construction costs for other terminals in Germany and Europe, the expert estimated "the average total construction costs" at over 1 billion. He would be proven right.
A More Solvent Brand
Now, there is a funding shortage. According to the minutes of the board meeting on Dec. 9, 2011, only 111 million were fully available. The minutes do not contain any critical remarks by the board members, including Chairman Wowereit.
Auditors with the PricewaterhouseCoopers consulting firm are currently poring over the books of the airport operating company to search for additional risks and arithmetic mistakes. Everyone involved knows that the airport operating company must remain solvent at all costs. But how?
The respective parliaments would first have to approve fresh capital from the federal and state governments, after time-consuming negotiations on the applicable supplementary budgets. Because the new airport will compete with other European hubs, the European Commission would have to approve the new financial injections. It is unclear whether the competition watchdogs will approve, or how long the approval process will take.
Probably because of this, officials in Potsdam and Berlin are considering alternatives. One of the proposals being discussed involves "airport bonds" that citizens could buy, a sort of emergency sacrifice for the airport.
One source of income could still be abundant, even if it can only be tapped in the distant future. There was allegedly an internal agreement under which the airport operating company would be allowed to sell the rights to the airport's name to companies after 15 years. For the moment, it is officially known as Willy Brandt Airport, but that name could then be removed and, as is common in the case of sports stadiums, replaced with the logo of a more solvent brand.
Translated from the German by Christopher Sultan
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