Case Studies: Berlin-Brandenburg Airport, Germany

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Project Overview

Berlin1.png
Figure 1: Berlin-Brandenburg Airport, Germany

Source: www.wikimedia.com
Berlin-Brandenburg Airport, Germany
Project Type: Both
Type of Project Financing: Public
Contract duration: 5 years (initial)
Budget: €6.11 billion (2014)
Project Time Line
1991: Formation of Berlin Brandenburg Flughafen Holding GmbH (FBB), comprising all airports of Berlin (TXL, SXF, THF). Shareholders are the state of Berlin, state of Brandenburg and the Federal Republic of Germany.
1992: Project conceived, planning commences for a new single airport in Berlin, named Berlin-Brandenburg International (BER).
1993-1994: Regional planning procedure (“Raumordnungsverfahren“), evaluating different location alternatives (Jüterborg, Sperrenberg, Schönefeld etc.).
1996: Shareholders agreement, the so-called “Konsensbeschluss”, for a single airport in Schönefeld. All other operating airports are to be shut down after new single airport starts operation.
1997-2003: Various tendering processes
1999-2004: Project award, official approval of plans (Planfeststellung): Single airport and almost all other infrastructure projects connecting the airport with the local infrastructure are approved by August 2004.
2006: Court challenge of planning approval notice is finally dismissed by federal administrative court. However, stricter noise protection measures are imposed.
2006: Construction of airport commences in September.
2008: Construction of terminal starts.
2010: Bankruptcy of construction planning company and changes in terminal construction works due to new European security regulations at airports delay the opening of BER to June, 2012.
2011: Initial scheduled opening of BER (November 2011).
2012: Non-compliance with fire prevention standards forces opening of BER to be postponed for a second time.
2012: Last court challenges for planning approval notice are turned down.
2013:

Updated beginning of operation scheduled for 2013. Opening of the airport postponed again.

In late 2014, CEO of the airport company Hartmut Mehdorn announces airport opening by 2017.


Introduction

Berlin-Brandenburg-Airport (IATA-Code: BER / ICAO-Code: EDDB, geo coordinates: 52° 21′ 44″ N, 13° 30′ 2″ O) is an airport under construction to replace existing civil aviation infrastructure in the Berlin-Brandenburg region, Germany. The project has received massive public attention for heavy cost increases, construction failures, environmental claims (e.g. noise), extensive delays and mismanagement.

The project was conceived in 1992. Berlin’s civil aviation infrastructure evolved historically at different loca-tions in Berlin-Tempelh of (THF/EDDI), Berlin-Tegel (TXL/EDDT) and Schönefeld (SXF/EDDB) in conse-quence of its division between 1945 and 1989. Following the fall of the Berlin Wall in 1989, Berlin’s access to air transport was scrutinised as the existing infrastructure - far separated in distance - did not hold for environmental and economic principles. In 1996, local and national politicians reached a consensus to con-struct a single airport at Schönefeld, after evaluating different location alternatives. It was further decided to subsequently close down operations in Tegel (active by time of project assessment) and Tempelhof (seized operation in 2008).

In 1997, a tendering process was initiated to privatise construction and airport operations. Two consortia, namely HochTief and IVG, expressed interest. In 1999, a deal with HochTief was overturned by a regional administrative court. Further endeavours for privatisation failed in 2003. Public commitment for a single airport, however, remained active. Flughafen Berlin Brandenburg GmbH (FBB), a public enterprise, resumed the planning of BER.

In 2004, FBB obtained clearance (approval of plans, project award) for its construction plans of Berlin’s new single airport. Adjacent to existing civil aviation infrastructure of the Berlin-Schönefeld-Airport, the following construction activities were approved:

  • A new terminal building is constructed to host an annual flow of 30 million passengers per year. Its modular setup allows for an expansion to a maximum capacity of 45 million passengers per year. BER has 132 check-in counters, 25 passenger boarding bridges and additional walk-boarding capaci-ty at its northern pier.
  • Refurbishment and construction work is conducted for the BER runway system to host aircrafts of ICAO-Code-Letter F. The new airport has two runways (07/25), both allowing for 83 start and landing operations per hour. SXF’s old south runway is refurbished and extended to a length of 3,600 meters to become BER’s northern runway. BER’s southern runway with a length of 4,000 meters will be newly constructed. 82 parking positions for airplanes will be available.
  • For passenger accommodation, four car parks with a capacity of 2,200 slots are built. In total, park-ing capacity will reach 10,000.
  • Adjacent to the airport, an area of 16 hectares is developed to become the airport’s commercial dis-trict.
  • An underground train station at the airport links BER to Berlin’s local public transportation system, as well as to long distance trains. It comprises of six tracks at three platforms – two for long distance and local commuter trains, and one for rapid train systems (S-Bahn).
  • There have been some modifications in the road system. For instance, a motorway access to Auto-bahn A113 has been built.

Overcoming court challenges for approval of plans, construction started in 2006. At that time, the beginning of operation at BER was planned for the end of 2011. Bankruptcy of the construction planning company, construction failures (e.g. smoke extraction system), changes in EU security regulations and mismanage-ment prompted a delay. By the time of assessment, the beginning of operation at BER was expected for mid 2017.

The Contracting Authority (Public Party)

The Berlin-Brandenburg-Airport project is conducted by a public enterprise named Flughafen Berlin Bran-denburg GmbH (FBB). In 1996, FBB’s public owners decided to develop a new single airport in the Berlin metropolitan area. This task – operation and development - remained with FBB (or its legal predecessors) as intended privatization failed. Hence, FBB is responsible for all conducted business processes, e.g. con-tracting construction companies or obtaining an operating permit. However, its decision making is largely influenced and supervised by its public owners. Ownership of FBB lies with the State of Berlin (amount of shares: 37%), State of Brandenburg (37%) and the Federal Republic of Germany (26%). By its set up, the project has a regional character.

Furthermore, FBB operates Berlin’s existing main civil aviation infrastructure at Berlin-Tegel (TXL) and Berlin-Schönefeld (SXF). Before the closure of Berlin-Tempelh of (THF) in 2008, FBB also operated this airport.

Sources of Financing

The Berlin-Brandenburg-Airport project receives financing through multiple channels: subsidies, credit and equity capital. Types of sponsorships, however, differ between the different infrastructure projects. Financ-ing airport investments (€5.4 billion) contain all three sources. Initially, the BER financial concept was based on FBB public owners spending €0.43 billion. FBB covenanted to provide €0.45 billion of equity capital and debt financed €2.4 billion in the form of long-term credit from private financial institutions to cover estimat-ed project costs of €3.3 billion. To facilitate FBB’s credit raising, public sponsors offered a 100% guaran-tee. For the terminal construction included in a TEN-T project, FBB received about €30 million of subsidies from the European Union.

Unexpected cost increases required additional project funding. In 2012, participating public authorities au-thorised €1.2 billion in accordance with their amount of shareholding at FBB. In 2014, FBB owners increased subsidies by €1.1 billion to cover for a budget shortfall. By the time of assessment (2015), while BER still being under construction, there have been public discussions about the question of how to finance potential additional funding requirements. Latest media reports indicate project costs of €8 billion.

The European Commission investigated the public involvement of the airport financing for a possible in-fringement of European common market laws in 2009 and 2012, but did not raise any complaint.

Rail (€0.636 billion) and road (€0.073 billion) works have different sponsorships, which have not been as-sessed so far.

Users

The main purpose of the Berlin-Brandenburg-Airport is to facilitate air passenger and air cargo transport. The airport serves as a gateway to Europe and other worldwide destinations mainly for residents of the regions Berlin and Brandenburg and transfer passengers, but will also attract airfreight forwarding companies.

Project Locality and Market Geography

The Berlin-Brandenburg-Airport project locality has a regional character. The node connects Berlin, Branden-burg and adjacent regions to Europe. The hinterland counts about 10 million inhabitants, out of which 6 mil-lion live in Berlin and Brandenburg. The next airports offering comparable regular domestic or intra-European flights are Szczecin (distance: 163 km, measured in great circle distance), Dresden (140 km), Leipzig (137 km), Hannover (261 km) and Hamburg (275 km). Whether the Berlin-Brandenburg-Airport will attract more long-haul traffic to outer-European destinations, such as Asia, the Middle East or North Ameri-ca or function as a hub, like Frankfurt, Paris or London to change its market geography is unknown by the time of project assessment. Currently, TXL and SXF serve as a final destination airport. Only 8% of TXL’s and SXF’s passengers combined are transfer passengers (2013).

Procurement & Contractual Structure

Procurement

Public tendering process for construction and operation of the airport starts in 1997. Politicians agree to offer at least 74.9% of FBB for sale to a private contractor, who shall obtain an operating concession with a minimum duration of 50 years. Public financial obligation shall be reduced to a minimum. Two consortia lead by HochTief and IVG indicate interest. In 1999, HochTief is awarded the concession. In the same year, an agreement between public authorities and HochTief is successfully challenged in court by IVG. The agreement contained the selling bid for FBB of DM650 million (€332.4 million) and an operation concession until 2057. Private investments for the airport’s first development stage are estimated at DM4,693 million (€2,400 million), while public obligations are estimated at DM1,598 million (€817 million). In 2003, public offi-cials cancel a second tendering process started in 2000, because an agreement with a merged consortium of HochTief and IVG could not be reached.

Risk Allocation

All risks can be classified as rather public, as shown in Figure 2. Design risks would have catastrophic magnitude. Other risks are acceptable to moderate. Risk mitigation strategies have not been made public.

Berlin2.png
Figure 2: Risk allocation

Project Outcomes

The project is still under construction and will be opened in 2017 at the earliest. Therefore, no statements regarding project outcomes can be made. However, the project is already heavily over budget and seriously delayed.

References

  • Berlin-Brandenburg Flughafen Holding GmbH (1993). “Ergebnisse der Standortsuche: Phase 1 der Vorbereitung des Raumordnungsverfahren – Zusammenfassung der Gutachten“

URL: http://www.bvbb-ev.de/index.php/dokumente-und-unterlagen/category/23-rov?download=266:ergebnisse-der-standortsuche-1-phase-des-rov-1993, last accessed 24/06/2015.

  • Berlin-Brandenburg Flughafen Holding GmbH (1997). „Konzept zur Privatisierung der BBF und Privatfinanzierung des BBI“ Dokument des Aufsichtsrat.

URL: https://ber.piratenfraktion-berlin.de/media/documents/Aufsichtsrat_BBF_ Privatisierungskonzept_September_1997.pdf.

  • Europäische Kommission (2009). „Staatliche Beihilfe Nr. NN 25/2009 (ex N 167/2009) – Deutschland Finanzierung des Flughafens Berlin Brandenburg International“.

URL:http://ec.europa.eu/competition/state_aid/cases/231148/231148_978961_8_2.pdf, last accessed 24/06/2015.

  • Flughafen Berlin Brandenburg GmbH (2014).“Geschäftsbericht 2013“.
  • Flughafen Berlin Brandenburg GmbH (o.D.). „Entwicklung des Fluggasterminals“.
  • Ministerium für Stadtentwicklung, Wohnen und Verkehr des Landes Brandenburg (2004). „Planfeststellungsbeschluss Ausbau Verkehrsflughafen Berlin-Schönefeld“ Band 1. 13. August 2004.

URL: http://www.lbv.brandenburg.de/dateien/luftfahrt/Planfeststellungsbeschluss.pdf, last accessed 24/06/2015.

  • Planfeststellungsbeschluss “Ausbau Verkehrsflughafen Berlin-Schönefeld” (2004),
  • Planfeststellungsbeschluss “Schienenanbindung Ost Flughafen BBI” (2010)
  • Masterplan Gateway BBI.
  • State aid cases NN 25/2009 and SA.35378.