Chinese buy Germany's Hahn airport for tourists, freight

FRANKFURT (Reuters) - Shanghai Yiqian Trading Company is to buy Hahn airport in Germany to secure a base for food exports as well as passengers heading to and from Asia, a deal highlighting China’s increasing appetite for overseas infrastructure assets.

A 'No Entrance' sign is pictured at Frankfurt Hahn airport 100 kilometers (60 miles) west of Frankfurt, Germany June 6, 2016. REUTERS/Ralph Orlowski

The planned purchase of an 82.5 percent stake in Hahn from federal state owners for a low double-digit million euro amount shows China’s aim of recreating Silk Road trade links between Europe and Asia that have already led to some big-ticket transactions.

In April, China Everbright Group, a state-backed financial firm, bought into Albania's international airport while China Cosco Shipping Corporation purchased a 67 percent stake in Greece's Piraeus Port OLPr.AT.

China's HNA Group has also been on an aviation acquisition spree. Last week it agreed to buy a stake in Virgin Australia VAH.AX, and is in talks for a stake in Air France-KLM AIRF.PA catering unit Servair to add to its planned purchase of Gategroup GATE.S.

Yu Tao Chou, chairman of Shanghai Yiqian Trading, explaining the rationale for the deal, said increased air freight links from Germany would help to meet the growing demand in China for Western products such as meat, which local producers are struggling to keep up with.

“When it comes to freight, we expect good business from the transportation of food products to Asia,” he said.

Hahn, a former military base near Frankfurt, has struggled to turn a profit but the new owners said on Monday they wanted to change that by boosting passenger and freight links with Asia.

The airport is used mainly by budget airline Ryanair RYA.I, but the Irish carrier has been cutting back on services from Hahn at its flies to more primary airports. Passenger numbers at Hahn, 120 kilometers (75 miles) from Frankfurt, dropped to 2.7 million last year from almost 4 million 10 years ago.

Unlike Frankfurt, Germany’s largest airport, Hahn has a 24-hour permit, making it useful for freight flights.

The current majority owner, the federal state of Rhineland-Palatinate, will provide around 70 million euros in subsidies for the airport over the next decade, the interior ministry said. Such subsidies must be approved by the European Commission and preliminary talks have already taken place.

The new owners will be expected to bear at least 50 percent of the investment costs, the ministry also said.

Chou said Shanghai Yiqian Trading also planned to buy the remaining 17.5 percent stake held by the state of Hesse.

Chinese investors have tried before to transform loss-making German airports. Luebeck airport was bought in 2014 with the aim of attracting medical tourists, but a year later the airport was bankrupt.

To avoid a similar scenario, Shanghai Yiqian Trading and Rhineland-Palatinate enlisted the help of KPMG to review the business plans, they said.

Additional reporting by Ashutosh Pandey; Writing by Victoria Bryan; Editing by Jane Merriman