Impatience with Fraport's management is growing. Leading politicians, industry associations and opponents of the Putin regime are demanding that the airport operator divest itself of its
stake in Pulkovo Airport in St. Petersburg (IATA: LED) sooner rather than later.
Now, however, there is movement in the matter, claims the Russian newspaper Vedomosti. "German airport operator Fraport is in talks to sell its stake in Saint Petersburg's Pulkovo Airport
before the end of 2023," the financial paper reports. The article refers to statements by the chairman of Russia's state-owned bank VTB. The parties involved had been negotiating Fraport's
exit from Pulkovo Airport for more than a year and may now be close to settling the case, reports Vedomosti. Since 2009, the German airport operator is holding a 25% stake in Northern Capital
Gateway, the controlling consortium of LED.

Penalties are a new revenue source for Moscow
Due to the Russian war against Ukraine and the international sanctions imposed on the Putin regime, all Fraport activities at St. Petersburg’s airport have been stalled since February 2022.
However, an exit would be expensive and very difficult to realize because of binding contractual clauses. If decisive parameters do not change, Fraport can only withdraw from the contract with
Capital Gateway in 2025 at the earliest, when the contractual agreement expires.
Fraport values its stake in the consortium at around €111 million ($119 million), although Russian authorities have been imposing penalties on foreign companies divesting from their Russian
equity holdings. It’s a new revenue source for the Kremlin!
No white knight in sight – so far
When asked, Andreas Schopf, Press Officer HR/International Activities at Fraport stated that contracts forbid Fraport a unilateral exit. But he indirectly left room for speculation by indicating
that further options would be examined should they appear. However, they are currently not in sight, he concluded.
In a hearing of members of the Hessian state parliament, Fraport CEO Stefan Schulte had stated that his company was continuously examining the issue of St. Petersburg Airport. But the contracts
concluded by his company did not include any exit clause. "So should we breach the contract and unilaterally terminate our participation without regard to the consequences and prospects of
success? That would mean leaving our assets to the aggressor Russia," he stressed to Hesse's state politicians. These assets include an outstanding loan receivable and the value of the
minority stake of 25%. A sale would also have to be approved by the Russian authorities, and the existing sanctions restrict the possible group of buyers. In the event that Fraport unilaterally
terminates the contracts and thus breaches the agreement, there is also the threat of high claims for damages from other Russian and international companies involved in LED’s business
affairs.
Interesting for investors, BUT …
According to these statements, the scope for an exit scenario is therefore extremely narrow.
It is conceivable, however, that Russian airport operators would buy Fraport's shares and assume the contractual penalties threatened by Moscow in the event of a Fraport exit. Vedomosti mentions
Novaport and Airport of Regions (Yekaterinburg, Samara, Platov) as potential candidates. After all, Pulkovo is the third largest airport in Russia by passengers (18.2 million in 2022), after
Sheremetyevo (SVO), which handled 28.4 million pax, and Domodedovo (DME), with 21.2 million travelers. St. Petersburg is also an attractive destination for air cargo
In addition, Aeroflot's low-cost subsidiary Rossiya operates a hub there. So Pulkovo is interesting for investors, but not for Western companies anymore. At least not as long as Russia continues
to wage war on Ukraine.
Heiner Siegmund
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