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Finance Ministry rejects blame for airport chaos

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The Finance Ministry has refuted claims by the Audit Office and Paphos Mayor Phedon Phedonos that it is accountable for the chaos at Paphos airport with long queues of passengers.

Earlier in the week, the Audit Office fuelled controversy over Paphos airport after Phedonos posted video footage of long queues at passport control, describing the situation as “dreadful”.

In a written statement on Tuesday, the Audit Office faulted the previous government for engaging in a preliminary agreement to expand a concession contract with airport operator Hermes, which delayed much-needed expansion plans.

The Audit Office claimed that despite not being the contracting authority, the Finance Ministry sidelined the competent Transport Ministry during the previous government’s tenure.

Furthermore, it said the director-general of the Finance Ministry led the negotiating team, endorsing the management company’s “unacceptable” positions regarding their demands.

“This pertains to the company’s contractual obligation to expand the airport to increase capacity (Phase B) and the illicit extension of the concession agreement by 5.5 years, directly impacting services with gross revenues of €1.5 bln, along with various financial disputes”.

In its response, the Finance Ministry argued the Paphos Mayor and the Audit Office had “presented facts in a selective, incorrect, and misleading manner, distorting the reality and creating negative impressions”.

“No ‘agreement’ has been reached between the managing company and the Ministry of Finance for the time extension of the concession contract and the satisfaction of the company’s requirements,” said the Finance Ministry.

The ministry conceded that the Concession Agreement includes milestones for commencing Phase 2 construction, which includes the expansion of the two airports.

“The milestone concerning exceeding Larnaca Airport’s capacity was satisfied in 2016, and according to the provisions of the Concession Agreement, the milestone for commencing Phase 2 construction for Paphos Airport was automatically activated”.

It argued that the operating company resorted to a fast-track dispute resolution process, requesting to indefinitely postpone Phase 2 construction, adding that the arbitrators rejected the company’s request.

“However, the decision, issued in 2021, does not obligate the company to carry out the Phase 2 construction.

“For this reason, the Republic of Cyprus has initiated an arbitration process against the managing company to compel it to either carry out the relevant construction works for Phase 2 or compensate the Republic of Cyprus accordingly,” the ministry states.

According to the ministry, Hermes had informed authorities that it could not secure bank financing to implement the construction works of Phase 2.

It said discussions in 2022 explored options that could facilitate the company in securing bank financing for Phase 2.

“From the above, it is evident the delay in implementing the additional investments at Larnaca and Paphos Airports is not due to the so-called ‘agreement,’ since no agreement has been reached for the time extension of the concession contract and the simultaneous waiver of the company’s claims”.