Airport concessions can lead to decreased passenger numbers, reduced overall budget revenues, increased fiscal risks, and diminished operational sovereignty for the state. In a country where tourism is the primary economic sector and lacks a well-developed road and rail network, this arrangement poses significant risks.

This was articulated by Miloš Vuković, the executive director of Fidelity Consulting, during an interview with “Vijesti.” He urges a halt to the process of granting concessions for Montenegrin airports in Podgorica and Tivat.

“From the outset, it was evident that the political control tower was steering the course of Montenegro’s public interest towards a pathway advantageous only to the concessionaire. The Government’s Navigation Plan for Airports, instead of presenting multiple alternative routes, has offered a single corridor: the transfer of vital air assets that are strategically crucial for the tourism sector, which constitutes 30% of GDP. If we hand over public interests to private entities, we risk becoming economy class passengers in our airspace—with higher costs, a loss of sovereign control over our domain, and a weakened tourism industry. It’s a clear choice,” Vuković asserted, highlighting the scandal surrounding the tender commission’s inconsistent voting as a substantial reason to annul the process.

He warned that granting the airport concession would erode the state’s strategic autonomy, compromising its control over critical slots and pricing during emergencies (such as fires, evacuations, or medical flights).

“Consider the COVID-19 scenario. We are shifting from viewing infrastructure as a public good to a scenario where even emergency interventions must conform to the concessionaire’s commercial timetable, as evidenced by regional trends,” Vuković noted.

What kind of company are we granting the concession to?

The representative of “Vijesti” explained that the aviation industry uniquely manages operations in both air and ground dimensions, with all market participants striving around the clock to attract every client. “I intentionally refer to ‘clients’ in a broader sense than mere ‘passengers,’ as it includes anyone incurring expenses within the aviation ecosystem, either during the flight or at the airport. Clients encompass both passengers and their companions, contributing to industry revenues through parking fees, taxi fares, and food and service purchases at the airport. The initial experience of a destination happens at the airport, which inherently operates as a monopoly. Herein lies the question: why has Montenegro commenced the process of granting the airport concession, and what repercussions could emerge from such an agreement?” Vuković elaborated.

He emphasized that ACG is a financially stable, low-debt, liquid, and solvent company, noting the absence of significant incidents at the airports, reflecting a high standard of safety and security.

“ACG has valuable assets valued at over 120 million euros, employing nearly 1,000 individuals. They have 40 million euros in cash reserves, with a recorded net profit of €10.7 million in 2024 (highlighting a net profit ratio of 25%), alongside a projected 12% passenger growth for 2025. Conversely, efforts to revitalize Tivat and Podgorica airports continue to face delays, with investment projects languishing on a list of key infrastructure initiatives for a decade. Over that time, Tivat has only marginally improved while Podgorica remains stagnant, indicating a deliberate neglect of this strategic resource,” Vuković stated.

A 2015 analysis by Steer Davis Glew estimated the Tivat airport project, requiring an investment of 43 million euros, would yield net economic benefits of 348 million euros by 2030, with a benefit-cost ratio of 4.6:1 and an economic internal rate of return (EIRR) of 24%.

“Such indicators mark a project of high economic and social significance. If this projection is valid for just 15 years at Tivat Airport, it’s important to consider the potential profits and increased client numbers Montenegro Airports might achieve if Podgorica Airport were included and the timeline extended to 30 years, aligning with the concession duration,” Vuković highlighted.

Macroeconomic context of the concession

He noted that Montenegro’s economy is heavily reliant on tourism, which constitutes up to 30% of GDP, with revenue from foreign tourists primarily funneled through two state airports.

“Passengers and their companions patronize hotels, apartments, and restaurants, shop at stores, and utilize taxi services upon arrival. Essentially, they are the driving force of tourism. Furthermore, the state benefits directly through VAT and excise duties, with tourists enhancing the state budget and employment, thereby stabilizing public finances through multiplier effects. The cycle is straightforward—an influx of clients at airports boosts budget revenues, while a decline produces the opposite effect. Hence, the growth of the total number of airport passengers is crucial for Montenegro, yet this key metric is not mentioned in the concession agreement,” Vuković stated.

He further explained that the concession model effectively shifts control of the airports from the state to a private operator, focused on maximizing profit per passenger.

“By necessity, to enhance this indicator, operators may increase airport fees, limit access for low-cost airlines, and hike service charges within the terminal, parking, and all managed areas. Such actions could lead to a decline in total passenger numbers compared to state management—this metric underpins the tourism industry and the state budget. In essence, granting the Airports a concession transforms them into profit generators rather than development centers, which could have severe implications for Montenegro, given its dependence on tourism for GDP,” Vuković concluded.

Concessionaire’s asset-backed loan potential

Vuković reiterated remarks from Jason McGuinness, Ryanair’s chief commercial officer, stating earlier this year that “Belgrade airport is too expensive for us right now. Do not permit foreign concessionaires to oversee your airport, as their focus is not on developing the airport, its business, or creating new job opportunities.”

“The scenario is clear: if the cost of a plane ticket rises significantly due to the concessionaire’s tariff hikes, low-cost airlines that transported over 600,000 passengers through our airports in 2024 can easily redirect to alternative airports. Consequently, Montenegro loses not just a passenger but the entire economic chain associated with them. The social implications are equally concerning; airports employ around a thousand qualified professionals. However, privatization often leads to a reduction in permanent roles as private operators tend to favor outsourcing and flexible contracts, potentially introducing lower-paid foreign labor—resulting in a loss of stable employment and contributions to social funds,” Vuković noted, adding that the shift towards increasing non-aviation revenues could further affect overall aviation incomes.

He pointed out that the state is committed to covering land expropriation costs for runway expansion and access road improvements (in Tivat, approximately 50 hectares, mostly along the coast), amounting to tens of millions of euros.

“We must also consider that the concessionaire may pledge the assets of the Airport of Montenegro, valued at over 120 million euros, as collateral for loans. Moreover, the Master Plan for the Development of the Airport of Montenegro until 2030, ratified in 2011, does not foresee granting the airport under concession. This raises the question: why is the state’s strategic document in a vital economic sector being disregarded?” Vuković questioned.

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