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German firm to take over 14 Greek airports

Greece's radical left Syriza government on Tuesday approved its first privatization granting a concession of more than a dozen key regional airports to Germany's Fraport-Slentel consortium in a deal worth €1.23 billion.

German firm to take over 14 Greek airports
Frankfurt airport, operated by Fraport. Photo: DPA.

The 40-year concession covers most of Greece's top travel hubs including Thessaloniki, Hania in Crete, and other islands such as Mykonos, Corfu, Rhodes and Santorini.

 The deal, which includes a further 10-year lease option, had been approved by the previous Greek government but was put on hold after the hard-left Syriza party of Prime Minister Alexis Tsipras came to power in January.

The government gazette on Tuesday published a decree indicating that the government “approves” privatization agency Taiped's decision to award the concessions to Fraport along with a leasing agreement totalling €22.9 million a year.
However, the contracts have yet to be signed and talks are still ongoing, the company said.

Fraport “does not expect the deal to be finalised this year”, a company spokesperson told AFP.

It is the first privatization announced since eurozone ministers approved on Friday a massive new bailout for debt-laden Greece.

The Tsipras government has agreed the privatations of public assets as part of the deal reached its international creditors to win a third international bailout since 2010 worth €86 billion, approved by parliament on Friday.

The creditors demanded the creation of a €50 billion euro privatization fund – notably concerning ports, airports and railways – to be managed by Athens but supervised by the international institutions.

In November, Fraport had issued a statement saying it had won a “privatization offer” for the airports, which also include Cephalonia, Zakynthos, Aktion, Kavala, Kos, Samos, Lesbos and Skiathos.

The company has pledged to sink €330 million into the airports during the first four years, and invest €1.4 billion during the lease's 40-year duration overall.

Greece's regional airports run a brisk business handling millions of tourists, mainly heading to island destinations.

According to the association of Greek tourism enterprises, Rhodes in 2014 accounted for over 1.9 million arrivals, followed by Thessaloniki with 1.5 million and Corfu with 1.0 million.

Many of the airports, however, are decades old and undersized to handle the demand, a fact not lost on Greek tourist operators who have long demanded an upgrade of facilities.

'General sale of Greece'

But hardline Syriza dissidents reacted angrily to the airport concession announcment, saying it was the first step towards “a general sale of Greece”.

The governor of the Ionian isles, elected on Syriza's ticket, also criticised the deal as “contrary to local and national interests.”

“This is an exceptionally negative development,” said governor Theodoros Galiatsatos, whose area of responsibility includes the airports of Corfu, Zakynthos, Cephalonia and Aktion.

He added that he would call a referendum on the issue and seek to block the decision in court.

Unions have also expressed opposition to the deal.

The Osypa union of civil aviation staff has already announced plans to contest the deal at the European Union's competition watchdog, claiming that it will place the industry solidly under German control.

Osypa also claims the Greek state currently earns €450 million from the aiports each year, and that the €330 million promised by Fraport in investment barely exceeds the annual maintenance cost of €5.8 million euros per airport.

The government had originally frozen the airport deal upon coming to power in January, saying it wanted to review it in order to maximise local jobs creation.

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BUSINESS

Is Germany’s Volkswagen becoming ‘the new Tesla’ as it ramps up e-vehicle production?

When Volkswagen chief executive Herbert Diess joined Twitter in January, he used his first tweet to warn pioneering electric car maker Elon Musk that he was coming after him.

Is Germany's Volkswagen becoming 'the new Tesla' as it ramps up e-vehicle production?
ID.3 cars in the Zwickau, Saxony production plant in March. Photo: DPA

The bold proclamation raised some eyebrows, coming from a carmaker better known for its 2015 “dieselgate” emissions cheating scandal than its green credentials.

But all that has changed since the German group announced an offensive to dominate the electric car market globally by 2025, vowing to set up six battery factories in Europe by the end of the decade.

“Volkswagen is the new Tesla,” declared the Financial Times, referring to the now dominant Californian e-car group founded by billionaire maverick entrepreneur Musk in 2003.

“Our transformation will be fast, unprecedented and on a scale not seen in the automobile industry in a century,” Diess said at VW’s inaugural “Power Day” last Monday, where he fired off a flurry of announcements.

READ ALSO: Volkswagen to spend 60 billion to transition to electric cars

Industry watchers say it’s a credible bet. Bloomberg Intelligence auto analyst Tatsuo Yoshida said Volkswagen “has (the) potential to overtake Tesla’s number one position… in a few years”.

Karl Brauer, an analyst with CarExpert.com, said VW’s “combination of financial resources and manufacturing capacity make it a prime challenger for Tesla’s dominance” — even if catching up with its US rival is “not going to be easy”.

‘Saving face’

Diess, who has headed the 12-brand VW group since 2018, has never hidden his admiration for Musk, whose brash and unconventional ways have a habit of disrupting markets.

The two men have a friendly relationship and regularly exchange emails, according to an insider.

If the aim of Diess’s carefully choreographed “Power Day” was to capture some of the enthusiasm of a Battery Day Tesla held late last year, particularly in the United States, it appears to have worked.
Diess’s announcements saw US investors flock into Volkswagen shares, including many small traders using online platforms.

In just a week, the Wolfsburg-based car giant gained 15 percent on Frankfurt’s blue-chip stock exchange, giving the group a market capitalisation of more than 130 billion.

The rise puts Diess’s 200-billion-euro target within reach but he has a way to go before matching Tesla’s $619 billion valuation.

VW’s “forced transition” towards more environmentally friendly cars has now been “recognised by the market”, said Eric Kirstetter, an auto sector expert at the Roland Berger consulting firm.

VW ironically owes its change of course to the dieselgate scandal, which forced the group into “a face-saving dive into an all-in electro-mobility strategy”, said Germany-based industry analyst Matthias Schmidt.

The Volkswagen E-Golf in production in Saxony in March 2018. Photo: DPA

Industry watchers note especially its decision to focus on developing a single platform for all its brands which could well be the game changer for the German giant.

The platform was used for the first time on the ID.3 model which launched late last year. UBS analyst Patrick Hummel called it “the most significant bet on electric vehicles made by any legacy carmaker to date” as VW’s competitors are using mostly mixed platforms and a combination of technologies.

READ ALSO: Volkswagen to slash up to 5,000 jobs to fund electric vehicle drive

Not Apple but Samsung

VW’s move is aimed at achieving economies of scale for its 12 brands.

“Tesla is learning what is takes to move into high volume, whereas companies like Volkswagen already have volumes and it’s just a matter of switching volumes from one platform to another which they have done routinely in the past,” said Subodh Mhaisalkar, executive director of the Energy Research Institute at Singapore’s Nanyang Technological University.

But VW’s size also comes with its own disadvantages — consensus has to be found for each major decision not only with the powerful head of the workers’ committee but also with managements of the group’s various brands.

Beyond the core electric technology, Volkswagen is also playing catch up with Tesla on the just as important software.

Ben Kallo, an analyst at US investment bank Baird, believes Tesla will remain the market leader on electric cars because of its advances in battery cell production and autonomous driving.

“VW might not be the Apple but the Samsung of the electric vehicles world,”UBS said in a report.

On Twitter, Diess is still 49 million followers short of Musk.

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