BackGVK to selectively bid for new airports; seeks regulatory clarity for new projects
The GVK Group has already been shortlisted and is among four bidders for constructing the Navi Mumbai International Airport
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Mumbai: The GVK Group will selectively bid for new airports, even as the infrastructure conglomerate seeks regulatory clarity for new airport projects. The GVK Group has already been shortlisted and is among four bidders for constructing the Navi Mumbai International Airport, near Mumbai.
“The government should give us a regulatory clarification for the airports that are getting privatised and for greenfield airports. In this context, we would be selectively bidding for new airport projects," said Rajeev Jain, chief executive officer at Mumbai International Airport Pvt. Ltd, or MIAL, a division of the GVK Group.
MIAL runs Mumbai’s Chhatrapati Shivaji International Airport (CSIA), while GVK also runs Bangalore Airport.
Talking on the sidelines of a seminar organized by consulting firm Centre for Asia Pacific Aviation, Jain said that while there is clarity on sharing and calculating revenues at CSIA, there is no clarity for other airport privatization projects including Bangalore.
“Investors would want clarity before bidding for any airport projects," Jain said, confirming that MIAL was forced to bid for the Navi Mumbai airport project.
MIAL has first right of refusal over the Navi Mumbai project, which is expected to have its first commercial flight by 2019. If another developer outbids MIAL and if the bid is within 10% of MIAL’s bid, then GVK can match the bid and become the airport developer in Navi Mumbai.
Rival GMR Group, Hiranandani Group and Tata Realty are the others shortlisted for constructing Navi Mumbai Airport by the City and Industrial Development Corporation of Maharashtra Ltd (CIDCO).
“Mumbai airport will handle 36 million passengers for the current financial year and it will reach saturation of 50 million passengers by 2019," Jain said.
The company that will operate the forthcoming Navi Mumbai international airport will keep 70% of its non-aeronautical revenues such as sales from retail outlets and airport parking charges.
The so-called hybrid till model of revenue sharing, also known as the shared till model, is aimed at keeping charges at the ₹ 14,500 crore airport at an optimum level.
The model is currently used at airports in Mumbai and Delhi.
Under this model, the developer of the airport will have to use 30% of revenue from ancillary activities to keep airport charges at optimum level; the rest are kept for the operator.
In the single till model, followed by Heathrow and Gatwick airports in the UK, all principal airport activities, aeronautical and retail, are taken into account to determine airport charges so airlines are charged lower. The airlines are expected to transfer these benefits to passengers. In contrast, only aeronautical or flying-related activities are considered under the dual till model, which private airport operators and their investors are keen on since it will help them increase revenue.
The hybrid model is a combination of these two principles, proving cheaper for airlines than the dual till model, but slightly more expensive than single till.
Jain of MIAL said the rates of Navi Mumbai will be competitive irrespective of who wins the contract.
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