NICOSIA, July 28 (AFP) - The Hermes airport group Wednesday entered negotiations to develop and operate Cyprus' two main international airports after preferred bidder Alterra Consortium pulled out over spiralling costs.
Negotiations are not expected to start in earnest until September, although the projects to upgrade the Larnaca and Paphos facilities, in the Greek Cypriot south of Cyprus, are already a year behind schedule.
"The (communications) ministry and its negotiating team will make every effort so negotiations are completed as quickly as possible," the ministry said in a brief announcement, noting that talks with the British-led Alterra "did not reach a conclusion."
Alterra was announced as the preferred bidder in November 2003 for the projects with an estimated total cost of 200 million Cyprus pounds (419 million dollars).
Talks were supposed to be wrapped up in March, but the deal foundered in wrangling over excess construction costs and potential loss of passenger traffic to the refurbished Tymbou airport in the Turkish Cypriot north of the divided island, reports said.
Alterra was reportedly concerned that Larnaca and Paphos would lose out if major European airlines decided to start using Tymbou.
Turkish-held northern Cyprus, recognised only by Ankara, is under an international travel and trade embargo.
But Washington and Brussels are actively trying to ease its isolation after Turkish Cypriots backed a UN reunification plan in April -- while Greek Cypriots rejected it.
The French- and Irish-backed Hermes Airports group includes Ireland's Aer Rianta International, Bouygues Batiment and the Chambre de Commerce et d'Industrie de Nice Cote d'Azur.
The build-operate-transfer (BOT) project is the first of its kind in Cyprus, with Larnaca set to open in 2007 and Paphos in 2006 under a 25-year lease.
Alterra had offered 48.96 percent of its gross revenue to the government in royalties, while Hermes offered 33 percent.
The Alterra Consortium included the British-registered Alterra Enterprises, Singapore's Changi Airport Enterprise, Manchester Airport, Bechtel International and Barclays European Infrastructure.
The upgraded airports are projected to handle total passenger traffic of 10 million by 2007 and 15 million from 2015.