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Spain’s Vacant Airport Typifies European Woes

• November 18, 2011 • 10:58 AM

As the governments of Euro-zone states totter and fall, a public works project in Spain illustrates the sort of thoughtless expenditure that underlies their economic distress.

Spaniards headed to the polls Sunday, worried about their crisis-wracked economy — Europe’s fourth-largest — and performed a ‘Berlusconi’ (or a Papandreou) on their socialist prime minister, Jose Luis Rodriguez Zapatero, replacing him with center-rightist Mariano Rajoy. But are Europe’s deepening problems the result of honest mistakes — or a lax attitude toward corruption? In one Spanish town, the line between a bad governor and good criminal has proven hard to draw. Our Marc Herman reports from the scene.

A half million dollars is a lot to spend for eight ferrets. So when the administration of Castellon Airport announced the contract, it made headlines. The animals, along with some falcons and a handler, were to be deployed at Castellon’s airport to control populations of birds and rabbits that might endanger aircraft. The contract, to be put in place over the next three years, pays the ferret wrangler €450,000, or a little over $600,000, for the ferrets and falcons to work six hours a day. The contract will commence as soon as planes start landing, which should happen early next year, after 15 years of planning and delays.

The contract depends, of course, on Castellon Airport ever getting planes.

Under discussion since 1997, and construction since 2004, Castellon Airport may or may not finally open next April. By then, according to accounting by the Valencia legislature, which helped pay for the airport, it will have cost just over €150 million Euros ($212 million) to design, build and promote.

For that money, it’s not yet finished and doesn’t even have permission to land planes.

Castellon Airport has become one of the better-known examples of Spain’s so-called “white elephant” problem. Across the country, local governments in the European nation of 44 million are saddled with thousands of publicly funded construction projects made in the starrier moments of a mid-2000s property boom. While in the United States, the real estate crash has hit private homeowners hardest, in Spain it was the city governments that gorged themselves, committing to massive projects on the assumption that taxes, like home prices, would always rise.

Now, with 21 percent unemployment and the whole world worrying about European bankruptcies, Spain’s cities are buckling under bills for empty swimming pools, shuttered sports facilities and unpopular vacation complexes promised generous tax assistance. All are too expensive to maintain and too valuable to just knock down.

Sunday, Spain’s government is expected to be the second to fall in a 10-day span — Italy removed Prime Minister Silvio Berlusconi last week — over crisis-related criticism.

Miller-McCune visited Castellon Airport to ask a simple, but subtle, question: was a 15-year effort to build an airport without planes a case of epically bad public administration that helps us understand the crisis Europe is facing? Or was it a crime — a case of corruption — that puts Europe’s crisis in a far harsher light?

With the world’s economy in shambles, we hoped that identifying the line between fecklessness and graft in one Mediterranean valley would help explain why whole nations are facing insolvency, and how they might get out of that, with the world’s economy hanging in the balance.

• • • • • • • • • • • • • • •

Castellon Airport sits in a valley between two olive groves in a range of lovely, green hills a half-hour’s climb from the Mediterranean shore. Reached by a curving road, the passenger terminal is a white, two-story rectangle with rib-shaped accents along the roofline — a marriage of tackiness and functionality that recalls an Ikea. The control tower blends into a sunny hillside.

Work continues. Inside the glass vestibule where the air traffic controllers will sit, the radar screens and radios and computers were still in boxes as of September, and the air conditioning did not work — even in fall sun, a glass box 10 stories in the air is an oven. Nearby, a cargo hangar was empty of machinery. The debarkation area, despite space for nine jets, had none. As of this fall, the only proof that Castellon Airport is an airport at all, or will be anytime soon, are dozens of bright blue road signs that claim so along the nearby highway. The first flights were to have landed in 2008, then 2009, and didn’t. Now they are planned, say the airport’s operators, for April 1, 2012.

But Castellon is not a big place — barely half a million residents — and when times turned austere, its new airport’s budget didn’t. A €300,000 ($408,000) commission for a seven-story bronze statue of the project’s instigator, a recently retired local politician named Carlos Fabra, went forward even as Spain’s crisis began to bite in 2008. That was before copper thieves ran off with one of the statue’s arms.

Custom furniture by Porcalenosa, a local brand of high-end ceramics, continued to arrive to the two-story terminal into this year. In October, most of the arty benches were pushed against a wall in the ticketing area, where construction workers take their post-lunch siestas on them.

The airport installed Europe’s only full-body X-ray scanner — the controversial machine that shows travelers naked — so people would have shorter waits at security, explained Nacho Perez, who works for the airport’s commercial section.

“It’s not required by law, but I like it,” he said, showing off the high-tech machine, which now takes up a hallway on the terminal’s empty departure lounge.

The local community had once backed the idea and had given large majorities to the region’s dominant political force, a center-right political party called the Populist Party, or PP. “In 1997, Castellon’s unemployment rate was technically zero. You used to read about it in the paper,” said Pedro Barba Lujan, a lifelong Castellon resident who runs a travel agency, GiraMondo, in the county seat, Castello de La Plana. “It was a different era. The airport was to bring people to Castellon and spend money. They built a lot of hotels, and Marina d’Or [a nearby resort]. They were planning an amusement park.”

And in theory, the airport’s price wasn’t outlandish. A new baggage system currently under consideration for the Philadelphia International Airport in Pennsylvania, for example, alone will cost $100 million, according to that airport’s management.

Still, in Spain, €150 million raised eyebrows. A similar airport in Huesca, a Spanish city about four hours away near the French border, cost about €50 million, and before long, had clearly failed. Last month, only four flights came and went from Huesca for a total of 44 passengers.

Last March, Carlos Fabra (he of the rotunda statue) and Francisco Camps, the president of the Valencia legislature, went ahead and inaugurated Castellon’s pricey, unfinished airport anyway — with a ceremony in the empty terminal — saying they were looking toward the future. Though no airline had signed a deal yet to fly to Castellon, and the facility had not received permission to land planes from Spain’s federal government, which regulates air travel, Fabra and Camps declared the airport open and announced that any resident of Castellon who wished to see it could now come and do so.

By then it was 2011, and tourism was not such a clear bet. “Since the crisis has come, we’ve seen how tourism has fallen in all the projects” said Marina Albiol, a minority member of Valencia’s legislature and the airport’s most vocal critic inside the government. “I doubt much that an airport will work. I hope it works now that it’s done. I hope there is activity, that it’s economically productive, but we doubt it.”

She was not alone, and she was the least sarcastic. Within days of the unfinished airport’s perplexing inauguration, 6,000 Castellon residents had joined a Facebook group proposing a rave on the 2,700-meter-long runway. The invitation was a doctored photo of Fabra in a pink flight attendant’s hat and Camps blowing confetti from a pipe.

That canceled the open house, and the airport, in any practical sense, once again closed. For most of 2011, no one has entered the facility without permission from the company that runs the airport, Concesiones Aeroportuarias, SA, a corporation formed in 2004 run on a skeleton staff of six employees.

• • • • • • • • • • • • • • •

Roaring up to curb by the baggage area, his arms full of reports and notebooks, Nacho Perez was not a calm man.

“At the end of this year, we have to have this authorization,” he said in Spanish. It was early October, and the calendar was not on the airport administrator’s side.

In order to be flying by April, Perez explained, the airport would need to be cleared by federal regulators in the next few weeks and reach deals with interested airlines by December. He later amended that to November, which was four weeks away at the time. Most of Perez’s team had just jetted off — from nearby Valencia Airport — to a travel industry conference in Berlin, where they would desperately woo anyone with an airline.

“The airlines sit there, you ask for meetings, and you’ve got 20 minutes to make a few contacts,” he said. Perez is a likable, sharp, 30-something MBA from Barcelona, with the go-along manner of a professional salesman. But he seemed to realize a bit late that he’d misspoken: making cold calls at sales conferences a month before his deadline wasn’t a great sign, 15 years into the effort.

He had been on the project the past seven of those years, and, walking through the empty terminal, acknowledged that 2011 had been a tough one:

“Ghost Airport of Castellon Spends €5.5 Million on Security Guards,” a local news website, El Confidencial, had worried in August.

“Firm Running Castellon Airport in Default,” said a daily in Valencia, Las Provincias, after the local government announced €22 million in public funds lost on the airport that year.

“Council Cuts First-Year Passenger Estimate by Half,” said the front page of the region’s main daily, Levante de Castello’, a few days before the Concesiones team left for their last-minute pitch to the airlines in Berlin.

A week before, in late September, the airport administration had, at a hearing with an increasingly hostile Valencia legislative committee, announced a cut in its projections for 2012 from 600,000 passengers to 300,000, an estimate Perez confirmed. Because the airport made money, and paid back its loans, by charging airlines a fee for every passenger who arrives, a 50 percent cut in passengers means a 50 percent cut in income, which the airport, in part, pays to the government. At €6, or $10, a passenger, which Perez said was a likely number, the airport had just told the government that 3 million more bucks had just disappeared.

Perez remained optimistic, but vague. “We’re negotiating with Ryan Air. … We’re in a process of pre-closing negotiations.”

He strolled through the terminal showing off the porcelain benches, reaching a bit for good news. “The ceramic industry is very important in Castellon,” he said. It would bring business travelers, and that would help convince the airlines, too. And the beaches: Castellon had more than 300 days of sun a year, he said.

He was not able to explain how they reached their estimates of the local air travel market — or how, after years of study, they had gotten it wrong by 100 percent, the same week they needed to sell the airport to both the airlines and their own government.

They had come to 600,000, then 300,000 by “looking at similar airports,” he said, without naming any. “Seeing what movement they’ve had. And with that, we have expert assessors who circulate in this world, and contacts with the airlines. Our estimates are estimates, but they also go with what we understand from the airlines.”

A spokesman for Ryan Air, the Irish discount airline, as well as two other airlines Perez named at targets, a Spanish domestic line called Air Nostrom, and a Hungarian carrier called Wizz Air, would not confirm any discussions with Castellon Airport. Air Nostrom has just pulled out of a similar airport four hours away, near Madrid, called Ciudad Real, citing lack of passengers.

Mott MacDonald, a British airline-consulting firm that carried out initial studies for Castellon Airport, predicted a potential market of 2 million passengers per year for Castellon. But Mott MacDonald would not comment on how it had reached those figures, or whether they remain accurate. Despite describing its work for Castellon in detail in its marketing materials, the company took pains to distance itself from its previous work with the project, saying it was a long time ago.

“We cannot comment on the performance of the traffic development work undertaken by the developer of the airport or other parties,” a Mott MacDonald spokeswoman, Christina de Burgh-Milne, said by e-mail. Tersely. Twice.

Meanwhile, the economic news worsened. Forty miles away — about two minutes by jet — airlines were reducing service to a competing airport, Reus. Three other airports near the coast, one unfinished in Murcia, and two operating in the farm town of Lleida and in Girona, on the French border, were facing threat of a wholesale pullout by the airlines keeping them alive.

In Castellon, too, the numbers Concesiones Aeroportuarias S.A., were getting harder and harder to make add up. A private company, Concesiones Aeroportuarias S.A. is actually a small consortium anchored by one of Spain’s largest banks, Banco Santander, which had arranged most of the financing for the airport project; and FCC, one of Europe’s largest construction companies — Spain’s Bechtel — which had done most of the heavy work to build it. Along with a handful of local, smaller finance and construction interests, Santander and FCC would recoup their investment by taking a percentage of the passenger fees charged to airlines that fly to Castellon — the $10 figure.

The private approach was also a competitive strategy, said Perez. As a private airport, one of the first in Spain, it could undercut fees charged by nearby airlines like Valencia, which are owned by the local and federal government, and limited by stricter regulations. “We charge less,” Perez said. Some of that savings would be passed on to passengers, who, in theory, would choose a €50 flight to Castellon, then perhaps take a €10 train to Valencia, than buy a €90 flight direct to Valencia.

Those fees would go to the consortium, and from that, the banks and builders would be repaid, along with a percentage for the Valencia government coffers. To do that, Concesiones Aeroportuarias struck a deal with the government of Valencia to be the airport’s sole operators.

As part of that deal, a public entity was also created, to act as regulatory oversight. Called Aerocas (“Airport of Castellon”), the public agency’s primary functions would be promotion, but also, according to Perez, to oversee that Concesiones Aeroportuarias S.A. complied with the terms of its contract with the government.

In September, the government named an ex-president of the local assembly to head Aerocas — a longtime politician who had just left office after undergoing liver surgery in March.

It was Carlos Fabra. The chief regulator for the airport would be the same man whose bronze statue was about to be installed in the rotunda.

They also revealed the length of the contract between Concesiones Aeroportuarias and the governments of Castellon and Valencia, granting the six-person corporation sole right to administer and collect fees from the airport’s operation.

Fifty years.

Less than two months later, on November 20th, Castellon went to the polls with the rest of Spain, and elected a new national government — and kept Carlos Fabra’s party in power. The PP even picked up a seat in the local parliament, with 53 percent of the vote. And with that, a friendly government in Madrid, and friends locally, the permission to land planes would finally arrive.

Only one problem: the planes themselves wouldn’t. No one, it turned out, wanted to fly to Castellon. …

To read the continuing saga of the phantom airport, see an upcoming issue of Miller-McCune’s print magazine.

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Marc Herman

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