How to Steal a Russian Airport
By JOE NOCERA
NYT
The decision to pull the initial public offering was announced on the last Sunday in May, late at night. The company that had been planning to sell its shares to the public — hoping to raise somewhere between $700 million and $1 billion — was the Domodedovo airport, the biggest and best-run of Moscow’s three airports, and the only one not owned by the state.
The airport’s investment bankers blamed the problem on the usual suspect: “market conditions” — meaning that they weren’t going to get the price that they had hoped for. And I suppose, in some literal sense, that was true. But it didn’t begin to capture the real story.
A few days ago, I wrote about the human cost of Russia’s lack of respect for the rule of law. There is also a business cost, one that hurts Russia on a daily basis. The decision by the owners of the Domodedovo airport to withdraw its I.P.O. is a perfect example — and helps explain why Russia simply cannot have a modern economy until it has a real rule of law.
It is no coincidence, of course, that the best airport in Moscow is the only one in private hands. The management company, East Line Group, took over Domodedovo in 1996 when it was “a small, rundown airport,” according to The Moscow Times. It poured enormous sums into upgrades and new terminals, attracted new business — and forced the government-run airports to spend money just to keep pace. It was good for everyone — including Domodedovo, which had revenues of $1 billion a year. This is how the textbooks say capitalism is supposed to work.
(More here.)
NYT
The decision to pull the initial public offering was announced on the last Sunday in May, late at night. The company that had been planning to sell its shares to the public — hoping to raise somewhere between $700 million and $1 billion — was the Domodedovo airport, the biggest and best-run of Moscow’s three airports, and the only one not owned by the state.
The airport’s investment bankers blamed the problem on the usual suspect: “market conditions” — meaning that they weren’t going to get the price that they had hoped for. And I suppose, in some literal sense, that was true. But it didn’t begin to capture the real story.
A few days ago, I wrote about the human cost of Russia’s lack of respect for the rule of law. There is also a business cost, one that hurts Russia on a daily basis. The decision by the owners of the Domodedovo airport to withdraw its I.P.O. is a perfect example — and helps explain why Russia simply cannot have a modern economy until it has a real rule of law.
It is no coincidence, of course, that the best airport in Moscow is the only one in private hands. The management company, East Line Group, took over Domodedovo in 1996 when it was “a small, rundown airport,” according to The Moscow Times. It poured enormous sums into upgrades and new terminals, attracted new business — and forced the government-run airports to spend money just to keep pace. It was good for everyone — including Domodedovo, which had revenues of $1 billion a year. This is how the textbooks say capitalism is supposed to work.
(More here.)
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