Tallink CEO: State companies should not be involved in property development

Renders of planned developments at Tallinn Airport.
Renders of planned developments at Tallinn Airport. Source: Tallinn Airport

Tallink Board Chair Paavo Nõgene has criticized Tallinn Airport's plan to develop a large amount of real estate on its own territory, saying the state should not intervene in a market where there is no market failure. However, Tallinn Airport Board Member Eero Pärgmäe says the focus of the plans is purely the airport's own development needs.

Tallinn Airport announced on Wednesday that Tallinn City Government had initiated a detailed planning procedure for the north-western area of the airport, which will involve the construction of a dozen commercial buildings, a new main entrance building and an extension to the current main building.

In response, Tallink Board Chair Paavo Nõgene expressed his dismay about the plans on social media, saying that it is considered good practice for the state not to intervene in a market where there is no market failure.

"For a long time now, I have not understood what the strategic view of the state is, as state property developers keep piling up," he said.

In Nõgene's view, while in the case of Riigi Kinnisvara AS, real estate development is understandable, the development of commercial and residential real estate at the Port of Tallinn and Tallinn Airport is not. He reasoned that the task of state-owned companies is, and ought to be, to develop the functions for which they were created - the port for port services, the airport for air services.

"If we look at both development plans, we can find classic commercial space and a residential development along Reidi tee, where the state owns 67 percent of the company. The direction and will of the state are realized by state representatives on the boards of the companies, so the question is, why is all this tolerated?" said Nõgene.

By way of comparison, he pointed out to example of the Estonian Drama Theater, which also has a vacant site adjacent to it, yet there are no expectations that an apartment block or a commercial building will be constructed there.

"The owner decides what the owner's expectations are. In my opinion, that is unreasonable," he said.

However, Tallinn Airport board member Eero Pärgmäe disagrees with Nõgene's criticism. He believes that it is entirely logical for the airport to go through a planning procedure with the City of Tallinn in order to map out its operations and add value to the property, by outlining possible uses for the land, site visibility, access, restrictions and so on.

"The airport's main goal in doing this is to plan areas for future passenger-related developments, including parking spaces for 1,500 vehicles, as is the case on the site today. After all, the planning process outlines the volume of buildings that it would be at all possible to build there," he said.

Pärgmäe told ERR that at the moment, things seem to be getting ahead of themselves, as the detailed planning is being conducted, first and foremost in order evaluate the land and assess how much the airport itself needs to expand. The process will also be used to determine whether there is enough space at the site for other uses.

"It's a classic planning process," he said. "The focus is on the development needs of the airport itself, but because it's such an important area, we're doing it with the city."

According to Pärgmäe, what may be built on the site in addition to the airport's existing infrastructure, when that might happen and who would be responsible for doing so, are all questions for the distant future, and there is no benefit in discussing them in too much detail at this stage.

Tallinn Airport plans to increase the average number of air passengers passing through each year from the current three million to five million by 2035.

Pärgmäe stressed that the airport's goal is not simply to grow at any cost, but if that growth is going to happen, then the required infrastructure has to be in place. The current terminal is built to serve 2.6 million passengers a year and can already appear too small during peak times.

"This issue will need to be resolved one way or another, and as for further growth, we will look at the trends and respond one step at a time," Pärgmäe added.


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Editor: Michael Cole

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