South Korea to Enter Russia’s Far East Air Transportation Market

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Jul. 11 – South Korean Incheon International Airport Corporation (IIAC) and Khabarovsk Airport has signed a strategic partnership agreement, the airport reports.

According to the agreement, state-run IIAC acquires 75,028 additional shares – 10 percent of authorized capital stock – of Khabarovsk airport of Russia’s Far East city of Khabarovsk.

The agreement has been signed by the chairman of the board of Khabarovsk airport, Konstantin Basyuk, and the CEO of IIAC, Che-Wuk Lee, within the presence of Russian Minister of Transport, Igor Levitin, and the governor of Khabarovsk Region, Vyacheslav Shport.

“The strategic partnership with IIAC, which manages one of the world’s best airports, will help Khabarovsk purport to become a highly-developed passenger and cargo infrastructure hub, thus making its contribution in social and economic development of the Far East of Russia,” Basyuk said at the signing ceremony.

Incheon International Airport, the biggest South Korean airport, is also currently Asia’s eighth busiest airport in terms of passengers, the world’s second busiest airport in terms of international cargo and freight, and the world’s ninth busiest airport in terms of international passengers in 2010.

“We want to export our knowledge and experience within the framework of our cooperation with Khabarovsk airport aimed at achieving our common goals. We have carried out works on creation of Master Plan of Khabarovsk airport and we understand that it has a high potential for becoming the top-class airport,” Che-Wuk Lee said.

Earlier, on December 22, 2009 IIAC signed a Master Planning agreement with Khabarovsk Airport.

The IIAC made a construction plan with different phases and selected the optimal location of various facilities in Khabarovsk Airport such as the runway, the apron, duty free shops as well as forecasting air traffic demand.

The contract allows IIAC and other Korean companies to participate in the construction and management of airports while the partial investment made by IIAC will facilitate its push into foreign markets.

The ACI and IATA predict that air traffic demand in Russia will increase at an annual rate of 8.2 percent until 2017 while outbound passengers on international flights will increase at a rate of 8.8 percent until 2012, making it the fourth highest annual rate in the world. Traffic on domestic routes is expected to grow by an annual rate of 9.1 percent, which is the third highest figure in the world.

Last year Khabarovsk airport, then owned by Russian firm Quartz-Invest (75 percent of authorized capital stock) and Cyprian Panadero Investments Ltd (25 percent), served a total of 1.36 million passengers, which represented an increase of 29 percent over 2009 figures.

“As the Far East is the location of intense competition over Russia’s energy resources, it has great potential in supplying natural energy sources to Northeast Asia while also becoming a key logistics hub for shipping Northeast Asian consumer goods to Russia and Europe,” Che-Wuk Lee, CEO of IIAC said.

Two parties didn’t disclose the transaction amount. Evgenie Shago, head of Ingosstrah-investment, has estimated a 10 percent stake of the Khabarovsk airport to US$30 million, while other market participants suggest lower prices.

According to Che-Wuk Lee, the Korean corporation may increase its share in Khabarovsk airport stock in near future.

Moreover, market participants suppose IIAC will also consider investing in Vladivostok airport in Russia’s Far East city of Vladivostok, which will hold 24th Asia-Pacific Economic Cooperation (APEC) Summit in 2012.

According to the Master Plan, US$120 million to US$150 million will be invested in Khabarovsk airport development within 2015.

Khabarovsk city is the second largest city in the Russian Far East, after Vladivostok. According to the 2010 Census preliminary results, the city is populated by 577,700 inhabitants.

In the past three years Khabarovsk been placed first in different categories of “Most Developed and Comfortable City of Russia” and got the second place in Forbes magazine list of the most suitable cities for private business in Russia in 2010.

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