Government and Hermes are close to agree on airport expansion

An agreement for the second phase of expansion at the airports in Larnaca and Paphos, which would also extend Hermes' control of the airports, is almost finalised between the government and airport operator Hermes. A preliminary agreement has been reached by both parties, and the Central Committee for Changes and Demands will soon make a final decision.

After months of negotiations, this agreement, which consists of three main parts, is a compromise. Extending the airport concession period is a major component of the deal and is directly related to the impending infrastructural projects.

Hermes has been granted an 18-month extension to run the airports in Larnaca and Paphos until December 2032. The previous arrangement was set to expire on May 31, 2023. The concession term is now less than it was originally suggested to be, which was November 2036.

Hermes will get €30 million in compensation as part of the deal, and he will give up his €400 million in prior claims against the state. Furthermore, the business shall release the other party from any additional claims arising from modifications to the business environment, including new laws and taxes, as well as from disruptions brought on by the pandemic and the ongoing conflict in Ukraine. This release also covers claims made between 2022 and 2024.

The planned modifications are anticipated to be finished over the next three years, and the administration sees this deal as a major accomplishment for Cyprus. The planned 50% increase in traffic will be mitigated by this additional infrastructure, which will also aid with the already growing passenger flow.

The audit service's earlier worries about the 2022 proposal, which was judged to be financially disadvantageous for the state, have been taken care of. In exchange for a 5.5-year contract extension, Hermes was required to invest €150 million in the second phase of works under the previous proposal. But the new deal eliminates part of the compensation that the operator had previously sought while guaranteeing a more equitable result that both Hermes and the state.

The agreement will open the door for improved airport facilities, putting Cyprus in a better position to handle demand for travel and tourism in the future.