Zvartnots airport plans $500M expansion amid debate over state’s financial obligations

By Arshaluis Mgdesyan

Yerevan’s Zvartnots International Airport is preparing a $500 million expansion to meet what its management describes as “unprecedented growth” in passenger traffic. The plan was announced by Marcelo Wende, CEO of Armenia International Airports (AIA), the company that has managed Zvartnots since 2001.

The investment comes as the government and the airport’s concessionaire clarify the nature of their financial relationship. In a July interview with CivilNet, former Economy Minister Vahan Kerobyan claimed that the government had accumulated over $500 million in debt to the company. In response to CivilNet’s inquiries, the Finance and Territorial Administration and Infrastructure ministries denied that any direct debt exists, saying the amount in question reflects “contingent obligations” that would only materialize in exceptional cases, such as the early termination of the concession agreement by the government.

Expansion to meet rising demand

In an interview with Forbes-branded appendix last week, Wende said passenger volumes have exceeded all expectations over the past two years, reaching 5.5 million annually—well above the terminal’s design capacity of 3–4 million. “Our current facilities are extremely overloaded. Expansion is vital,” Wende said.

The 10-year investment program will double the airport’s capacity: the number of boarding gates will rise from six to sixteen, and the arrivals, passport control, and customs areas will more than double in size.

According to Kerobyan, the concession agreement guarantees a fixed rate of return for the operator. Because the company’s actual profitability has been lower in recent years, he said, the difference has accumulated as a liability. “On paper, the guaranteed versus actual profitability gap amounts to several hundred million dollars—over $500 million,” Kerobyan told CivilNet. He said mechanisms such as “extending the concession monopoly” were being discussed with the government to settle the issue, warning that such a solution “would still come at the taxpayers’ expense.”

AIA, in an August 12 letter to CivilNet, rejected the existence of any debt, saying: “The government of the Republic of Armenia currently has no obligations toward the concessionaire.” The company confirmed it is in “ongoing, constructive discussions” with government agencies about expanding airport facilities and developing a new master plan.

In nearly identical responses, the Finance and Territorial Administration and Infrastructure ministries explained that the state budget bears no direct financial commitments under the concession contract and that no payments are planned for this purpose in the 2025 budget. They described “contingent obligations” as potential liabilities that arise only under specific conditions—such as the early termination of the contract initiated by the government—and emphasized that current profitability and project progress make such risks “very low.”

The 20 percent internal rate of return guaranteed under the contract, the ministries said, is regulated through mechanisms that do not require budget payments, including revision of the airport’s master plan, adjustment of tariffs, or extension of the concession period. Both ministries confirmed that negotiations are ongoing within an interagency commission, created by a January 2023 prime ministerial decree, to optimize and possibly extend the concession agreement.