The agreement for the expansion of Larnaca and Paphos airports was signed on Monday at the presidential palace. Under the agreement, Hermes Airport will commence work by March next year and in the case of Larnaca it is set to be completed in 30 months and in the case of Paphos in 27.

The expansion would increase the visitor traffic capacity of the airports by 70 per cent, this covering the forecasted needs of the economy and tourism industry until 2036. According to Transport Minister Alexis Vafeades, work will cover the expansion of terminal buildings as well as work on runways. A building that would serve budget airlines will also be built at Larnaca airport, he said.

Negotiations for the expansion of the airports were started by the previous government in 2022 but were stalled because the audit office had claimed they were heavily weighted in favour of Hermes and that the government would not be getting a fair deal. From the way the deal has been presented now it would appear that Hermes had given up its demands for compensation as high as €430m accepting just €30m and giving up all claims for compensation in relation to the operation of Ercan airport.

Another point made by the government was that the contract with Hermes, which ends in May 2031, would be extended by only a year-and-a-half to the end of 2033. In 2022, the company was seeking a five-and-half-year extension to the contract, with the government taking this to mean it had negotiated a better deal.

Whether ending the deal with Hermes sooner rather than later would be beneficial to the country is debatable. The airports which were opened in 2006 were awarded on a 25-year Build Operate Transfer (BOT) contract, which turned out to be a very good bit of business by the government. The new airports were completed on time and have been running very smoothly ever since, seeing passenger traffic steadily growing over the years and Cyprus’ air connectivity improving drastically.

We mention this only to stress the benefits to the economy of the agreement with Hermes and to question whether the transfer of the airports back to the state in 2033, as per the agreement, would be a good thing as the government has suggested. It cited the shorter extension of the agreement as something of an achievement, but is it? Can anyone safely say that the economy would be better off if the airports were transferred to the state?

We think the longer airports remain out of the state’s hands and the incompetent management of state bureaucrats the better it would be for the country. The handing over of the construction and operation of the airport was one of the most successful decisions taken by the Clerides government – the construction was completed on time and the operation of the airports has been smooth and problem-free for 18 years, comfortably coping with constantly increasing traffic. And the number of airlines flying into our airports has steadily increased, exposing the foolishness of the claims that closure of the national airline – Cyprus Airways – would have had a negative impact on tourist arrivals.

The truth is that the cooperation with Hermes Airports has been very beneficial to Cyprus and there should be no complaints by bureaucrats about the profits of Hermes during this time. No company would have built and operated the airports without a profit motive.