Ukraine invasion: Fraport exits St Petersburg Pulkovo Airport. Alarms sound for airport investors


The economic ramifications of the Russian invasion of Ukraine become more evident each day.

Germany, previously hesitant to participate in sanctions and other measures, suddenly opted to grasp the nettle and to take the lead internationally.

Accordingly, it is perhaps of no great surprise that Fraport, the only foreign operator to have a stake in a Russian airport, should follow suit. After 12 years managing the St Petersburg Pulkovo airport within an international consortium, it has put the keys through the door and just walked away, despite doubts it can even get its money back.

This action raises questions. Will Fraport reappraise all its investments? Will others do the same?

With very little M&A activity anyway, could this signify the end for foreign airport investment by the private sector just when it is most needed?


  • Following the Russian invasion of Ukraine, Fraport walks away from Russia’s St Petersburg Airport, where it has a 25% stake in the operating company. 
  • There is no guarantee it can get its money back; the contract bars it from an on-sale.
  • Fraport has taken a hit at several of its assets and investments in the past and St Petersburg had been a difficult one from the start.
  • The investor's expertise, though, had helped secure a consistent increase in passenger traffic.
  • The evolving situation, on top of the pandemic, must prompt not only Fraport but all private sector airport investors to reappraise their existing or anticipated investments just when the sector needs the funds and proficiency that it/they can provide, more than ever.  

Fraport calls a halt to its participation in the consortium operating St Petersburg Pulkovo Airport

On 04-Mar-2022 the German airport operating company Fraport announced a “halt” to its business in Saint Petersburg, Russia. The company has held a 25% share in Northern Capital Gateway, which operates the Pulkovo airport there, as an asset, since 2009. 

It is not exactly clear what "halt" means and something may have been lost in translation, but the strong words of Fraport's CEO (see below) do suggest that the company is distancing itself from the consortium for the long term. 

Pulkovo is one of 24 airports outside Germany where Fraport has an interest as operator/investor.

Some of them are in groups, such as Fraport Brasil (two airports); Fraport Greece (14); and Fraport Twin Star Consortium (Burgas and Varna airports in Bulgaria), whereas others are stand-alone, i.e. Lima, Peru; Delhi, India; Ljubljana, Slovenia; and Xi’an, China, in addition to Pulkovo.

There are also six US airports where Fraport acts as an airport concessions developer (shops, FBO etc.) under the banner Fraport USA.

Active airports for Fraport AG

The furthest northern ‘asset’ is no longer – and is about to be frozen out

Pulkovo is the furthest north of these airports and right now is about to be frozen out of the network.

Fraport has already removed it from the list of its airports on the Fraport website, apart from basic operational information.

With 19.6 million passengers, in 2019 Pulkovo was the fourth busiest airport in Russia after the three main Moscow ones – Sheremetyevo, Domodedovo and Vnukovo. Passenger numbers fell by 44% in 2020 but recovered by 65% in 2021, to 18 million, led by strong domestic demand.

See the related report: Russian aviation #2: airport capacity increases, regions lead the way, Jun-2021.

The only Russian airport being developed as a PPP with foreign participation

At present Pulkovo is the only airport in Russia to be developed on the basis of a PPP with foreign involvement, although there have been previous attempts made in the east of the country. For example at the Ulan-Ude (Lake) Baikal Airport, which was actually sold (highly unusually) to a western firm headquartered in Vienna in the mid-2000s but which returned to public ownership when another member of the owner’s group got into financial difficulties.

The Lithuanian company Avia Solutions Group was an investor in Moscow’s fourth airport, Zhukovsky, before selling its stake in Dec-2018.

The ownership is now all Russian.

There are private sector Russian organisations operating airports there, for example Novaport (which eventually took over the Ulan-Ude airport in 2017), Aeroinvest, Airports of Regions, Basel Aero (which is an instrument of Basic Element, the company founded by the oligarch Oleg Deripaska), Gazprom (which is majority-owned by the Russian government), Rostec, and Summa Group.

In addition there are numerous joint ventures operating airports that involve combinations of the companies listed above and/or others, and/or municipalities (cities, regions).

Several financial sector investors in Russian airports have already had international sanctions imposed on them

Several Russian investment banks and hedge funds are, or have been, involved in the financing of airports there, including Sberbank (which holds approximately one third of all Russian bank assets), Vnesheconombank (VEB) and VTB, all of which are now subject to a varying degree of sanctions from one or more countries as a consequence of the Russian invasion of Ukraine, including exclusion from the SWIFT international money transfer mechanism. (Sberbank’s EU Unit has already gone bust).

VTB was an original (and the largest) investor in the Northern Capital Gateway consortium.

Such sanctions, which include limitations on foreign transactions, may impact on the financing of some Russian airports accordingly.

In addition, there are several independent investors active in the Russian airport system, either genuinely independently or as a named ‘front’ for a company (and who may be, or may not be, ‘oligarchs’).

CAPA airport database is full of Russian airport investor profiles

It is a quite complex arrangement, and one that is not replicated to the same degree anywhere else in the world.

The CAPA Global Airport Investors Database holds profiles on over 50 of these organisations, which are active in airport investment or have expressed an interest in Russia in the past.

Investing in the Russian airport system is difficult, as Fraport discovered

It also notoriously difficult for a western company to break into the Russian airport system and become an investor in it on acceptable terms, which even Fraport was content to acknowledge.

But Fraport could not have foreseen that it would find it necessary to exit its investment so quickly, and potentially at a loss; it having experienced financial issues previously, in Turkey and the Philippines.

So what prompted Fraport to dip its toe into the murky Russian waters at St Petersburg?

Possibly the fact that the airport, the only commercial one to represent Russia’s second largest city (5.3 million population), was underachieving at the time, despite St Petersburg being a greater attraction touristically than is Moscow. In the first year of the Northern Capital Gateway’s operation passenger traffic increased by 25% but it hasn’t all been plain sailing since then, and traffic declined in two successive years since 2010.

Generally speaking though, traffic growth has been consistently strong and in percentage double figures. The management was able to obtain a special dispensation for ‘open skies’ in the form of uninhibited traffic rights between several countries and the Pulkovo airport solely, three years ago, just before the pandemic.

Between 2009 (the year before the concession being awarded to Northern Capital Gateway) and 2019 traffic increased from 6.7 million to 19. 6 million.

Saint Petersburg Pulkovo Airport: passenger numbers/growth, 2004-2021

Nothing to connect Putin with the transaction

There is no evident connection to Russian President Vladimir Putin – who was born in St Petersburg when it was Leningrad and who held political office there. As such, Putin can be expected to ‘favour’ his home city but the transaction took place during the four-year period he was not President, but rather Prime Minister.

The city was capital of the Russian Empire for two centuries until 1918.  

The original consortium lost one of its original participants – VTB Bank – replaced by Russian, Middle Eastern and Asian investors

The PPP Agreement became effective on 29-Apr-2010 and had three parties/signatories — the St. Petersburg City Government, Pulkovo Airport Company (100% city ownership) and the Northern Capital Gateway Consortium (NCG). It remains in force until 30-Oct-2039.

Northern Capital Gateway was originally a consortium of Fraport (35.5%), VTB Bank (with a 50% stake), Cypriot investor Koltseva Holdings Ltd. (7.5%), and Copelouzos Group/Horizon Air Investments of Greece (with 7%), within a holding company, Thalita Trading, that agreed to develop, reconstruct and operate St Petersburg Pulkovo Airport under a 30-year PPP deal.

The ultimate owner remains as the City of St Petersburg Administration.

In Jul-2016 Fraport announced that it would sell a 10.5% stake of Thalita Trading Ltd to the Qatar Investment Authority, Fraport retaining its role as Pulkovo Airport's operator. The transaction was concluded in Oct-2016.

In Apr-2017 VTB announced that VTB Capital had signed an agreement with a consortium consisting of the Russian Direct Investment Fund, Mubadala Development Company and other leading Middle Eastern and Asian co-investors, alongside Baring Vostok Private Equity Fund V and related funds, to sell a 25% equity stake in Thalita.

As a result of the transaction VTB Capital reduced ownership in Thalita to 25.01%; Fraport AG's and Qatar Investment Authority's stakes would remain at 25% and 24.99% respectively. Fraport's role as the lead airport operator of Pulkovo again remained unchanged.

Then, in Jul-2017 Russia's Federal Antimonopoly Service announced that a Government Commission on Monitoring Foreign Investment had approved a deal relating to St Petersburg Pulkovo Airport. The Thirty-Seventh Investment Company purchased 25% of the shares of the St Petersburg airport from VTB Bank. This removed VTB as an equity holder.

Shortly afterwards, the Russian Direct Investment Fund (RDIF) announced the completion of the transaction to acquire a 25% stake in Thalita Trading by the consortium of international investors named above.

RDIF’s CEO at the time, Kirill Dmitriev, said, "RDIF's efforts helped to form an international consortium of investors, attracting more than USD200 million into Russia from leading funds, including from Asia and the Middle East. We are confident that the arrival of new shareholders will contribute to the dynamic development of Pulkovo".

There has been no statement yet from these ‘replacement’ investors as to how they regard recent events and their ramifications.

Together with the extensive top management experience imported from within Fraport, including the original CFO, Andrea Pal, who is now CEO of Fraport Brasil, there always were high hopes for Pulkovo, and in terms of traffic development at least they had been realised.

No hiding place from Black Swans

But there is no hiding place in the industry from Black Swans; and the biggest and blackest for decades just emerged out of the Kremlin.

In a statement from its CEO, Dr Stefan Schulte, Fraport said, “There is no justification for the attack on Ukraine by Russian forces. We condemn this war for being an armed attack on a sovereign state and its people – a clear breach of international law that is causing unspeakable suffering to the people of Ukraine".

These are strong words, some of the toughest on the invasion so far from the industry. But it has not gone unnoticed that, at the time of writing, Germany has led the way, in the EU and generally, in both applying sanctions and in supplying arms to Ukrainian forces.

Fraport has ‘evacuated’ Pulkovo already…

In what appears to be a rapid volte face, Dr Schulte added, “Fraport does not have Fraport personnel on site and is not engaged in any business activity at Pulkovo. Furthermore, Fraport is not involved in airport operations at Pulkovo, which is the responsibility of Northern Capital Gateway’s management. Pulkovo’s management board does not include any active or former employees of Fraport AG. The Fraport Group is not involved in any other business activity in or with Russia. This means that Fraport is not providing advice or transferring any know-how to Russia”.

…but it can’t even sell its stake

The management continued: "Fraport is doing everything possible to retrieve these assets (its 25% stake), which otherwise would be left behind in Russia”.

Then, in what is a glaring example of the hitherto-mentioned difficulties in concluding any sort of business co-operation in Russia, which had been highlighted previously by Ms Pal, Fraport stated, Fraport holds its minority stake in Russia as an asset – just like many other German companies did in the past when investing in Russian factories, technical facilities or subsidiaries.

"The concession contract excludes the sale of Fraport's stake in the company. Fraport is evaluating to what extent international economic sanctions against Russia could affect its minority holding, as well as the conclusions that can be drawn for taking further action.”

Fraport is now evaluating to what extent international economic sanctions against Russia could affect its minority holding, as well as the conclusions that can be drawn for taking further action.

Dr Schulte said: “The war brings indescribable suffering to the people of Ukraine. In these hours and days, our thoughts and sympathy are with the Ukrainians who are enduring so much pain”.

Foreign investments can be a godsend, but also a scourge

In the fairly recent past CAPA has explained how foreign investments can be a godsend for airport operators, as was the case during the pandemic (see, for example, Fraport: more than half 2021 earnings from overseas businesses.

But there is always another side to the coin.

Apart from St Petersburg, Fraport is also represented at Xi’an in China, where it is the only known foreign, western, airport investor. Fraport engages there in the operation of dedicated landside infrastructure elements (terminals, parking facilities, administration buildings, fire service facilities, medical and other facilities) and the associated land properties at Xi'an Airport. As well as the management of the terminals, including responsibility for the commercial areas.

Despite Fraport's experiences at Antalya and Manila airports, there has evidently been a philosophy of calculated risk-taking in the past.

But Fraport could get its fingers burned again if China were to invade Taiwan, thus prompting another round of global sanctions against that company and global opprobrium to boot.

Every airport investor must by now be putting every investment under the microscope

A combination of pandemics, anticipated pandemics (a news report on 07-Mar-2022 claims Putin has a Soviet-era facility in Novosibirsk, Siberia, where an arsenal of bio weapons is housed, including smallpox, anthrax, and Ebola), inflation, collapsing economies, ‘climate change’ and the cost of ‘net zero’ (now estimated by McKinsey to be USD275 trillion by 2050, or USD9.2 trillion per year), the use of economic sanctions, and the growing number of physical conflicts must prompt every airport investor to reappraise their holdings rapidly, and to scrutinise potential transactions in great detail just as the industry needs the investment.

Could Fraport seek to offload its foreign investments and retrench to Frankfurt, or just cut its losses where it perceives there could be other problems in the future? Might others follow suit?

It is unlikely that the major investors would do that just yet, but anything is possible currently in this worst of all possible worlds.

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