Fate of the mega airport depends on growth

Fate of the mega airport depends on growth

It looks as if the financial market has calmed down; however, the foreign exchange rate and the interest rate have not gone back to their pre-shock levels. It looks as if the foreign exchange basket will stay over 2.20. That might not bother the Central Bank too much; however, it needs to take the control again for the fight with inflation.

The benchmark interest rate is almost 1.5 percent points over the lending interest rate. We will see what kind of a path it will take. In Brasilia, which is claimed to be the victim of the same “dark circles,” the risk premium has increased 100 basis points whereas in Turkey, it has increased 200 basis points. It would be good if the government focuses on that.

Today, I want to leave aside macro topics and handle a micro topic; that is the new airport of Istanbul that was tendered with a record price a while ago. Both the record price and the colossal capacity created quite a debate. Our prime minister, who loves mega projects, presented this mega airport project as the strong Turkey’s occasion for honor. He is right. The new airport, planned to be opened in 2019, will have a 90-million passenger capacity in the first stage. Later, the capacity will go up to 120 million, and then to 150 million. If these targets are reached, then most probably we will have the biggest airport in the world.

Bahçeşehir University Center for Economic and Social Research (BETAM) issued a research study last Friday, searching for the answers to two questions: Do we really need these colossal capacities? Second question is, does the new airport have a strong feasibility, the one that was tendered for 22 billion euros of built-operate-handover model for 25 years?

It is obvious that there is a need for a much bigger airport, taking into consideration that the Atatürk Airport cannot handle 45 million passengers and that Turkish Airlines (THY) and other airlines are fast growing. But how big? BETAM said this depends on how much the Turkish economy will grow in 25 years.

There are two indicators for number of passengers: Population growth and the increase in per capita income. By calculating how these factors determined the number of passengers for Atatürk Airport, the increases in the number of passengers are estimated based on the population growth and real growth in the next 25 years. Population growth is more or less known. The critical point is the growth rate. BETAM has two growth scenarios. In the first scenario, it accepts that the Turkish economy will reach the generally accepted potential growth rate. In the second scenario, a lower growth is envisaged taking into consideration the existing restrictions limiting growth.

In scenario 1, the new airport will serve 80 million passengers in 2019, then 120 and 150 in the next phases of end of 2020 and 2030. This estimation confirms that Istanbul needs a mega airport. In a lower growth rate scenario, the 90-million capacity is reached in the second half of 2020, then 120 million toward 2050. In other words, the 90-million capacity looks adequate.

Having the biggest airport in the world is no problem to the Turkish people. However, the manager of the airport may face huge losses in the second scenario.

The land allocated for the new airport is 7,500 hectares. Atatürk Airport’s land is nearly 1,200 hectares.
Even if you multiply it by three for a 150-million capacity, then it makes 3,600 hectares. The remaining 3,900 hectares can be used for many things. Probably the consortium knows what it is doing.

Seyfettin Gürsel is a columnist for daily Radikal in which this piece was published July 3. It was translated into English by the Daily News staff.