PISA AND BOLOGNA LEAD EXPANSION OF NORTHERN-CENTRAL ITALY'S

UNCLAS SECTION 01 OF 02 FLORENCE 000032

SIPDIS

DEPT. FOR EUR/WE AND EB/TRA LAWRENCE JONES
BRUSSELS FOR FAA REPRESENTATIVE KURT EDWARDS

E.O. 12958: N/A
TAGS: ECON EAIR ETRD IT AVIATION FAA
SUBJECT: PISA AND BOLOGNA LEAD EXPANSION OF NORTHERN-CENTRAL ITALY'S
AIRPORTS


1. National and international air passenger traffic in Emilia
Romagna and Tuscany has increased substantially in 2005, and
prospects for a further increase over the next three years are
excellent. All three major airports in the two regions
(Bologna, Pisa and Florence) reported two-digit growth over 2004
in terms of numbers of passengers. Smaller airports such as
Rimini, Forli' and Siena also increased traffic over previous
years, especially from charter flights (Rimini) and low cost
airlines (Forli').


2. In 2005, the Bologna airport increased its passenger traffic
to 3.7 million, up 12.4% from 2004. This year, the airport's
total passenger traffic will likely pass the 4 million mark. In
recent years, the airport has expanded the number of national
and international destinations, including a bi-weekly direct
flight to New York operated by Eurofly, via a brand new airbus
330-200. The flight operates from mid June to the end of
September, serving about 20,000 passengers. In 2006, this
flight will be extended from early May to November.


3. Armando Brunini, Vice President and Commercial Director of
Eurofly, says the company sees the flight as a success with
potential for growth. "We are satisfied with the public's
response to our Bologna-New York project, especially given that
this year the project was in the initial launching phase. I am
sure that the 2006 season will further validate our choice to
commit to this project with a greater demand not only from local
travelers but also from incoming passengers. Incoming traffic on
the flight currently account for 35 percent of the total."


4. In Pisa, the largest airport in Tuscany, passenger traffic
jumped to 2.35 million in the same period, up 15% from 2004.
Thanks to the temporary transfer of Florence air traffic to Pisa
for three months this year due to major maintenance work, Pisa's
passenger traffic in 2006 is estimated to reach the 3 million
mark. Pisa's airport has seen exponential growth in recent
years due to its strategic decision to partner with low cost
airlines such as Ryan Air and Easy Jet.


5. On March 23, 2006, the company operating Pisa's airport,
Societa Aeroporti Toscani (SAT),presented a master plan for
development in the coming years. To keep up with growth, in
fact, the airport has ambitious plans for the expansion of its
infrastructure. The 60-million Euro plans include a major
enlargement of the main terminal, a possible light rail link to
Pisa's central train station, new parking facilities and a brand
new hotel that looks like the Leaning Tower. Airport officials
emphasized the fact that the new building projects will be
completed by using environmentally friendly techniques and
materials and that the new facilities will have innovative
energy-saving features such as the use of natural light and
solar panels.


6. In addition, the airport has signed an agreement with the
Italian military for the transfer of space previously occupied
by military aircraft to the civilian side of the airport, thus
increasing the airport's holding areas (parking spaces) from
nine to twenty-three. The recent growth has also turned the
airport into an attractive investment opportunity, and SAT's
ownership has plans to take the company public within the next
six months to raise the funds necessary to meet the expansion
plans. A recent study by the University of Pisa values the
airport's economic impact on the territory at Euro 500 million
annually with over 3,000 people employed directly and indirectly
as a result.


7. The Florence airport, the third largest in the district with
1.7 million passengers in 2005, increased its traffic by 14%
over 2004. The performance matched the first large increase in
the number of tourists in Florence since 2001. In 2006,
however, Florence is expected to maintain the same level of
traffic as in 2005, due to a three-month closure
(February-April) for major repair work to the runway and other
construction projects.


8. Comment: The upgrading of the airport infrastructures in
Tuscany and Emilia Romagna is part of a strategy by local
governments and business communities to improve the
competitiveness of the economic system, which has been suffering
from increased foreign competition in several industrial
sectors, a need for a more modern transportation infrastructure,
and high costs of services. This strategy has happily coincided
with the deregulation of the airline industry in the EU and the
market entry of new carriers. Pisa and Bologna, in particular,
have capitalized on this development and profited from what Pisa
officials called the "democratization" of the travel industry,
or the potential of low cost airlines to attract new travelers.


9. The upgrading of Bologna, Pisa and Florence airports will
benefit the two regions' trade with the United States. The
regions of Tuscany and Emilia Romagna alone account for 20% of
the total bilateral trade between Italy and the U.S. The
improved airport infrastructures will facilitate the large U.S.
business and university communities in these regions. It is to
serve these communities and the millions of U.S. and Italian
tourists who travel between the two countries each year that
Pisa airport officials are actively seeking a direct flight to a
major U.S. destination. End Comment
DEMPSEY