US Exim Bank to tap India’s airport sector
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New Delhi: The Export-Import Bank of the US is looking to provide loans to India for procuring American equipment and technology for its booming airport sector that has investments worth at least $5 billion lined up for the next four years. Export-Import Bank chairman Fred Hochberg said he had held talks with civil aviation minister Ashok Gajapathi Raju to expand India-US cooperation in the sector.
“Airport screening, security screening, baggage screening, air traffic control—those are the kind of areas America has grown its expertise in and which we can finance,” Hochberg said in an interview earlier this month on the sidelines of World Economic Forum’s Indian Economic Summit. “Obviously security issues are paramount, so an effective and less expensive way of security screening is important,” he added.
Hochberb’s statements indicate that technology such as advanced airport scanners could be on the cards for airport security soon. The aviation ministry has faced problems over buying technology for Indian airports in recent years. The ministry has not specified the nature of the problems.
A second airport for Goa, cleared in August, is being built by GMR Airports Pvt. Ltd, which also operates the Delhi and Hyderabad airports. Bidding for a second airport for Mumbai in Navi Mumbai is nearing completion.
The state-owned Airports Authority of India has said it plans to spend nearly $3 billion to expand airport infrastructure across the country. India aims to build 50 new airports in the next three years as part of a plan to boost regional connectivity. Of these, at least 10 will become operational over the next year, Raju has said.
The finance ministry, which has so far given grants mostly for the North-Eastern airports, has announced that it will also give grants to fund such low cost airports. Besides this, some airports that have recently been modernized are lining up for further expansion, including the ones in Delhi, Hyderabad and Bengaluru.
The hectic modernization activity comes on the back of double-digit growth in India’s domestic air traffic that is expected to reach 100 million passengers by 2017, up from 80 million in 2015.
Globally, India recorded the fastest domestic air passenger growth of 18.8% in 2015, according to the International Air Transport Association. International traffic to and from India has also been growing rapidly and has touched double digits.
Hochberg said India used to be EXIM Bank’s biggest customer but that position has now been taken by US neighbour Mexico. “Mexico is our largest portfolio. India’s was second, now it’s in the top five,” he said. “Just the last year or two (Exim has slowed down in India). We were very active in aircraft petrochemicals and power for a number of projects. Lot of renewables. (Then) there was a slight hiatus and now it’s been reactivated and the Prime Minister is... (keen on more growth). I expect to see more activity as a result of that,” he said.
Hochberg said an old case where a lawsuit alleged that EXIM had failed to consider the economic impact of its loan guarantees for the purchase of wide-bodied Boeing aircraft by Air India has ended. “The court found in our favour in every single case,” he said. Hochberg said he did not agree with the view that Airbus was able to manage more aircraft deals than Boeing in India. “There is some (truth to the argument)” that Airbus has cornered new airlines such as Vistara, AirAsia India as also IndiGo and GoAir. “But if you think about Jet Airways, SpiceJet and Air India -- a mixed fleet -- then it’s a more nuanced picture than that,” he said.
Many Indian airlines have been in the red for several years and continue to be loaded with debt. Hochberg said while there was no written rule that an airline had to be profitable to get EXIM loans, there was a mechanism in place.
“We would back US goods but we need to get it paid back. We look at the overall business proposition of the airline because we make loans, we don’t make grants. That’s our criteria. We look at the repayment ability,” he said.
Air India (which gets sovereign guarantees) and Jet Airways have done business with the bank. SpiceJet is yet to begin, he said.
“I know they are actively working with Jet, Air India and so forth. I understand there is a campaign there but I don’t have any more details on that,” he added.
SpiceJet reiterated earlier this month that it was looking to order dozens of planes in the coming months. Boeing has said, without specifying timelines, that it expects Jet Airways to order more planes.