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Ahead of merchant airports policy, companies scout for land, tie-ups

Ahead of merchant airports policy, companies scout for land, tie-ups
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First Published: Mon, Jun 11 2007. 12 27 AM IST
Updated: Mon, Jun 11 2007. 12 27 AM IST
In anticipation of new government rules that are expected to allow new airports to be built by private entrepreneurs with the requisite land, aerodrome developers have started scouting for locations to build new airports and tying up with realty firms to ease land acquisition troubles.
Close on the heels of German airport investor Fraport AG’s tie-up with DLF Ltd to develop up to five airports, Singapore’s Changi Airports International has started work with local partner Tata Realty and Infrastructure Ltd on its search for viable locations for such investments.
Senior civil aviation ministry officials expect other such proposals to come up soon.
The ministry expects to circulate a draft “merchant airport” policy among various other ministries within the next six weeks before sending the guidelines for such private investment to the Union cabinet for approval, civil aviation secretary Ashok Chawla said.
Merchant airports are expected to allow up to 100% foreign ownership; investors could even be foreign airport companies or airlines.
Merchant airports would cater to domestic and international passenger traffic apart from meeting cargo requirements of industry and retail chains, Chawla said. The policy on greenfield airports allows private developers but the land is to be acquired by the state government.
Most civilian airports in India are owned by the government’s Airports Authority of India (AAI). Kochi, formerly Cochin, has the country’s first privately run airport while Delhi and Mumbai airports have been leased to private consortia for a 30-year period. Greenfield airports at Bangalore and Hyderabad are being built by private groups and are expected to be ready by next year.
The aviation ministry says India needs some $30 billion (Rs1.23 trillion) until 2020 in airport investments for the infrastructure on ground to be able to match the airlines boom. The number of planes— passenger, private and cargo—in Indian skies is expected to jump to 1,500 in 10 years from the nearly 300 today.
Airport security and air traffic control is likely to remain with government bodies such as the Central Industrial Security Force, Central Reserve Police Force and AAI. Further, airport projects will require clearance from the defence and environment ministries.
Recognizing that the biggest challenge for any airport investor will be land, Changi Airports said it was leaving procurement of large acres of land required for an airport to the Tata group, which holds 51% in a joint venture the two partners have set up.
“Based on the current policy regarding land acquisition, it would be a challenge to obtain a sizeable tract of land for airport development,” said Ng Tim Peng, vice-president (India), Changi Airports. “However, we are confident that Tata will be able to manage this.” The company has invested in airports in Latin America and China years and is now looking towards India for investments.
Fraport said it has already identified projects it would like to kickstart with DLF. “Specific locations are already in mind. Of course these would be in regions where DLF is already present and has available land,” said Klaus Jeschke, project director India, who is visiting the sites next week to ascertain feasibility of the projects. His firm has a 10% stake in Delhi International Airport Ltd, being upgraded by a GMR Group-led consortium .
DLF, in its public offer prospectus, said its joint venture with Fraport would jointly bid for building a new airport planned at Chennai. It also plans to bid greenfield airport projects including one in south Gujarat and the dedicated “general aviation” airport in Delhi. A general aviation airport handles private aircraft, helicopters and charter flights, apart from small cargo planes.
Jeschke said his company is open to new partnerships to bid or develop other airports.
“Our cooperation agreement with DLF is for a few locations in India, these are fixed in the agreement. For other projects, we are open to new partnerships. If we think we together are a right fit (with GMR for other projects), then we would be happy to go along with them,” the Fraport India representative said.
Analysts said new airports in smaller cities may find operations will take longer to break even since most of passenger traffic is concentrated in India’s large cities, which already have large airports or have plans for second airports.
“AAI has an airport in virtually every important city in the country. Most of these handle few flights. So where will the revenue come from (for the new airport investors)?” asked Y. Shashidhar, vice-president, Frost & Sullivan (South Asia & Middle East).
He suggested that handing over the existing airports to the private sector on leases was a more viable option.
But, the civil aviation ministry was clear that AAI airports will not be privatized. “Those (unused) airports sound impressive on paper, but at most of these places they exist in name. These are existing strips from the days of the World War II and are not really viable for sustained operations. They will require development from scratch,” Chawla said. And, in cases where revival of AAI-run airports is possible, opposition from workers’ unions and communist parties would make privatization difficult, he added.
“Alienating a public asset is going to be very difficult. We have seen it in the case of Delhi and Mumbai and then in Chennai and Kolkata. That is a route we will not take for this window,” Chawla said. The government faced bitter opposition and strikes from AAI workers’ groups early in 2006 when it handed over the shabby New Delhi and Mumbai airports to private consortia to develop and run.
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First Published: Mon, Jun 11 2007. 12 27 AM IST
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