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Is ‘Georgian Dream’ to Investigate the ‘Aviation Sins’ of the President’s Mother?

Published: June 24, 2013 | 10:47 am
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Maia Misheladze, Economic Journalist, Versia Newspaper
Hitherto unknown, scandalous details about the Tbilisi Airport tender – why the terms of TAV-Georgia’s contract have drawn the new government’s attention, and how the Turkish monopolist of the Georgian airspace obtained billions through Giuli Alasania’s lobbying.
“At our airport, which is managed by the Turkish company TAV, there is a problem with the landing strip, which is in a catastrophic condition. I regularly fly myself, and on a number of occasions, the plane landed hard, as the noises suggested. Whichever country you might go to, such landing strips are no longer being used there. The asphalt is disintegrating, and the building is not in an ideal condition either.” Such was the Georgian Prime Minister Bidzina Ivanishvili’s reply to Versia’s question about whether the Ministry of Economy and Sustainable Development constitutes a weak link in the government. Ivanishvili also made public the contents of one of the recent meetings.
The Minister of Economy and Sustainable Development, Giorgi Kvirikashvili, is reviewing the terms of TAV-Georgia’s contract. Moreover, he is to thoroughly investigate why the landing strip is in a poor condition. According to the information obtained by Versia, the terms of TAV-Georgia’s contract drew the Ministry’s attention after the wheels of Prime Minister’s private plane sustained damage on the rough landing strip. The contract between TAV-Georgia and the Georgian government needs reviewing in any case. Versia brings you the details of this shackling contract, and of the Tbilisi Airport tender.
Why TAV-Georgia holds a monopoly over the aviation market
With the help of certain high ranking members of the previous government, TAV-Georgia established a monopoly over the Georgian aviation market, allowing its Turkish owner to pocket billions in profits. As early as three years ago, Versia wrote about TAV’s monopoly, though the only effect the article had, was to dissuade the then Minister of Economy and Sustainable Development, Vera Kobalia, from selling off the Kopitnari aerodrome for a Lari. Naturally, a foreign company was unlikely to buy Kopitnari at a time when 220 kilometres away, a Turkish company had the Tbilisi airport under its management. At the time of the Turks’ arrival, the then Prime Minister, Zurab Noghaideli, actually placed terms within the contract, under which no other company was allowed to operate an airport within a 300km radius. These terms are still in place today, and precisely they became the reason why Batumi’s airport was also handed over to the Turks. A while ago, Versia also reported that the Turks forced the closure of all cafe-bars in the vicinity of Tbilisi’s international airport, apart from one, which they initially rented for a monthly sum of 1800 USD. Later on, they closed this establishment as well, leaving only the vastly overpriced airport bar in operation. There, drinks such as tea or Coca-Cola are on sale for between 5 and 10 GEL.
The scandalous details of the Tbilisi Airport tender
The bidding process for the airport, which was announced at the beginning of 2005, has a controversial history. A year earlier, a well known German consortium named Tacom Gloria Pivden had already expressed their interest in constructing the airport, and were apparently lobbied in this process by the late former Prime Minister, Zurab Zhvania. This consortium had a substantial experience in building airports both in western and eastern Europe. The Turkish consortium had the President’s mother, Giuli Alasania, lobbying for them. At the time, there were also press reports about the alleged involvement of the President’s uncle, Temur Alasania, but according to Versia’s source, Giuli Alasania was the actual interested party, and this has since been confirmed. Currently, Ms Alasania owns the International Black Sea University campus, where Turkish companies have been granted hundreds of hectares of space through her lobbying, according to Versia’s source.
Thus, there was a clash of interests between Mr Zhvania and Ms Alasania with regards to the airport tender, and naturally, the President’s mother’s protege company eventually prevailed. By that time, however, Mr Zhvania had already passed away. According to Versia’s well placed source, Mr Zhvania had persistently been asked to meet the representatives of the Turkish consortium, but was initially unwilling to do so due to the Turks’ apparent lack of experience in airport building. Eventually, the persistence seems to have paid off, and Mr Zhvania met the Turkish delegation in his own office at the Chancellery, but kicked them out shouting and screaming a mere half an hour later, according to our source.
The source also tells us that the German consortium had presented a more sophisticated design to the then Prime Minister, but most crucially, Zurab Zhvania viewed this process as part of a longer term strategy, and was reluctant to hand the airport over to a Turkish company, fearing that Georgia would become a mere ‘appendix’ of the Turkish airspace, which, in reality, is precisely what happened.
The shackling contract signed with TAV-Urban
The Saakashvili government had announced that Tbilisi needed an airport capable of handling up to 1500 passengers per hour, at a time when it handled between 87 and 90 passengers per hour. The modern airport was built at a cost of 62 000 000 USD, and the construction process was entrusted to the winning bidder under terms which experts have described as shackling. One also needs to remember that the older airport, which the Shevardnadze government had renovated at a cost of 15 000 000 USD, was shut down immediately after the new one was completed by TAV-Georgia. Construction workers had been hurt during the latter’s building process, and its roof fell off on a number of occasions.
As mentioned earlier, the airport tender was announced in early 2005, and was won by a consortium consisting of the Turkish Celeb, the American A & J, and GTS from Luxembourg. However, following disagreements between these companies, the Luxembourger partners left the consortium, leaving the winning bidders, headed by Celeb, short of funds, unable to provide firm financial guarantees on their behalf, and thus forcing the Georgian government to sever its ties with them. The government then proceeded to hand over the rights to the airport’s construction to TAV-Urban, another Turkish participant of the tender, whose bid had earlier been deemed inadequate. The contract with TAV was signed on September 6, 2005.
According to the contract, TAV-Urban (which established TAV-Georgia) had been awarded the right to run the airport for a period of 20 years. The company contractually committed itself to investing 62 000 000 USD into building Tbilisi’s airport, and a further 28 500 000 USD into building the one in Batumi. In order to finance the construction of the two airports, TAV-Georgia proceeded to borrow sums of 27 000 000 USD each from the European Bank for Reconstruction and Development (EBRD), and the International Finance Corporation respectively. Our source tells us that the burden of repaying these loans was eventually passed on to the government and the passengers through an increase of the airport tax to 22 USD. This means that each passenger pays an additional 22 USD for his or her airline ticket for flying from the Tbilisi Airport, and this money goes directly to TAV-Georgia. If the Tbilisi Airport was to reach its capacity of handling 1500 passengers per hour, then the Turkish company would register enormous incomes through airport taxes alone.
Furthermore, the airport’s service charges between 10pm and 6am are being increased by an additional 25% for all non-Turkish aviation companies, but only by 10% for the Turkish ones. For example, servicing one of the Boeings that the Tbilisi airport uses most frequently would cost 765 USD to a non-Turkish airline, and 650 USD to a Turkish one. If passenger service costs 415 USD to a non-Turkish company, it only costs 340 USD to a Turkish one.
Why the Tbilisi Airport is not a transport hub
It would be interesting to know whether TAV-Georgia are breaching the terms of their contract with the Georgian government, if only due to their failure to maintain the landing strip to a satisfactory standard. The head of the communications department at the Ministry of Economy and Sustainable Development, Tea Bolkvadze, has told Versia that the contract obliges TAV-Georgia to repair and maintain the functioning landing strip at all times. According to her, sanctions for any contractual breaches are being set by the Civil Aviation Agency. Thereafter, the company is to proceed with rectifying the breaches, and such precedents do exist.
As for constructing a new landing strip, Ms Bolkvadze explained that the previous government signed a new agreement with TAV-Georgia on this issue, extending the company’s 20 year long period of managing the airport by a further 10 years. The talks which Giorgi Kvirikashvili is currently holding with TAV-Georgia’s representatives, are to establish precisely who will be constructing the new strip – TAV-Georgia, the government, or another company altogether. Mr Kvirikashvili does not wish to comment on this subject prior to the conclusion of the talks, even though it would be interesting to hear, bearing in mind what we have discovered about the tender and the shackling terms of the contract, whether or not the officials view TAV-Georgia as monopolists of the Georgian aviation market.
The COMMERCIAL TIMES contacted TAV Georgia to comment on the issue. Public relations manager says the company will deliver a competent answer next week. TAV Georgia’s position will be published in the newspaper’s July 1 edition.

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