The passenger terminal facility at Inverness Airport is operated by Inverness Air Terminal Limited (IATL).

The PFI contract between HIAL and IATL was signed in February 1998. The contract, which came into force with the opening of the terminal building on 23 May 1999 and will expire 22 May 2024, provides for the availability of the terminal facility services at Inverness Airport. If expansion of the facility takes place within the last 5 years of the term this will be extended by 5 years.

The capital cost of the terminal was £9,600,000 as at May 1999. During the financial year 2002-2003 (1 April to 31 March) HIAL incurred £1,365,000 (2001-2002: £1,302,000) in charges based on passenger throughput for the provision of agreed terminal services.

Due to the nature of the contract, with charges based on the number of passengers using the facility) the company’s annual commitment is variable. The minimum payment to be incurred in 2003-2004 will be £1,393,000.

The commercial aviation industry has changed dramatically since the original PFI deal was signed with airports now having to actively compete to attract airlines. However, at the time there was a pressing need for a new terminal building at Inverness and entering into a PFI contract was the only option available.

We now believe that the per passenger charge paid for use of the terminal at Inverness is burdensome in the current aviation climate and restricting the growth of the North of Scotland’s largest air hub.

HIAL has had ongoing discussion with Noble Group regarding the future of the PFI contract for Inverness Airport terminal. We have received widespread support for this work from our stakeholders, including the Scottish Executive.

We believe that a restructuring of the deal leading to greater control of the terminal and access to associated revenue streams would assist us in our ongoing work to attract new air services to Inverness and increase passenger numbers.

We have evaluated a series of options to resolve the situation regarding costs associated with the PFI contract and have referred these to the Scottish Executive. The detail of these options and the ongoing negotiations are commercially confidential and we are not in a position to disclose further information at this time.

ENDS