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. Last Updated: 07/27/2016

Alfa's Offer Raises Many Questions

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Sheremetyevo Airport's manifold shortcomings are no big secret. The state-owned and operated airport has been floundering for over a decade and in the past year or so has been hemorrhaging clients to privately operated and better-run Domodedovo Airport. The appointment of a new general director to Sheremetyevo, Sergei Belyayev, in 2001 with a brief to overhaul the airport and revive its flagging fortunes failed to yield serious results (and within 12 months he got the boot).

So, in steps Alfa Group with a letter to Prime Minister Mikhail Kasyanov proposing the government hand over management of Sheremetyevo to Alfa-Eco in exchange for "substantial investment" in the airport.

Sounds interesting. After all, a powerful private-sector player, provided with the right incentives, is surely what is needed to sort things out. And given the specifics of doing business in this country, the successful candidate is going to need major political clout and the muscle to sweep away the multiple mafias and assorted rent-seekers that have been operating with impunity in Sheremetyevo for the past decade.

Alfa-Eco, with its aggressive reputation, its predilection for hostile takeovers and political lobbying skills, sounds like a prime candidate for the job. So, should the government hand management of the airport to Alfa-Eco on a plate and let them get on with it?

Clearly not. What it should be doing is organizing an open and competitive management tender, and awarding the contract to the consortium with the best credentials and with the most cogent business plan for overhauling the airport. Surely Alfa isn't the only major conglomerate with its eye on the airport business.

Equally important, the conditions of the contract should be transparent. A deal ceding management control in return for some vague promise of investment into Sheremetyevo would be a recipe for disaster (does anyone remember the so-called investment privatization tenders of the mid-1990s?).

Furthermore, while the likes of Alfa-Eco have the political connections and the heavies to do part of the job of turning Sheremetyevo around, they have zero experience in operating an airport. Presumably, the successful consortium should contain a company with a track record in airport management.

Unfortunately, the government's record for organizing straight tenders does not inspire a great deal of optimism. And let's not forget that the infamous loans-for-shares deals of the mid-1990s started with an innocuous-sounding offer from certain members of Russia's banking community to manage the state's shareholdings in key enterprises in return for loans to the government.