Mumbai: India’s GMR and GVK groups, the respective business houses behind the companies managing airports in New Delhi and Mumbai—the country’s top two airports—will together with international partners participate in bids to choose the developer to privatize Chicago’s Midway International Airport in the US, senior executives at the two groups said.
The bid could entail spending around $1 billion (Rs4,300 crore) according to an investment banker.
Under the privatization plan of the Chicago airport—the bigger airport in the city is the O’Hare International Airport— that is owned by the Illinois state, the private developer will have long-term exclusive rights to operate the airport and to collect all revenues associated with the operation of Midway including aeronautical, leases, passenger facility charges and federal grants, subject to Federal Aviation Authority, or FAA, rules.
/Content/Videos/2008-07-04/Josey on GMR_MINT_TV.flv
The agreement term for the airport, which handled nearly 20 million passengers last year, is expected to be at least 50 years.
The Bangalore-based GMR Group won the 20-year operations right of Sabiha Gökcen International Airport at Istanbul earlier this year. Its plan to bid for the Chicago airport is part of its interest in several global airport projects, an executive said.
“As an airport operator, we will look at all airport opportunities in the world. But there is nothing firmed up in the case of Chicago,” said Madhu Terdal, chief financial officer, international operations, GMR Group. A second GMR executive, who did not want to be named, added the group had plans to bid for airport projects in South Africa, Prague in the Czech Republic and St Petersburg in Russia.
GVK, too, is considering the Chicago airport project but has not finalized details, said Sanjay Reddy, vice-chairman of GVK Industries Ltd and managing director of Mumbai International Airport Ltd, that runs Chhatrapati Shivaji International Airport at Mumbai. Reddy did not divulge further details. GVK Power and Infrastructure Ltd, a group company, has already firmed up plans to bid for similar airport projects in Europe.
Arvind Mahajan, executive director at audit firm KPMG India, said the interest of the Indian groups in the Midway International Airport is a natural progression from their local experience. For instance, GMR after it completed the Hyderabad airport “can leverage its capabilities for going global as there are no big airport projects coming in India. The winning of Istanbul airport by GMR is clear symbol of that,” Mahajan said.
This March, GMR Infrastructure Ltd (a GMR Group firm), Limak Insaat San.Ve Tic. AS and Malaysia Airports Holding Bhd have signed an agreement with the Turkish ministry of defence for the Istanbul airport.
Commercial airports in the US are virtually all owned and operated by local or state governments, according to the website of FAA, an agency of the US department of transportation that regulates civil aviation in that country.
An investment banker, who did not want himself or his employer to be identified, said the privatization of Chicago airport will be a landmark transaction in the industry and the size of the deal would be more than $1 billion.
According to the website of the Midway International Airport, the City of Chicago has engaged Credit Suisse Securities (USA) Llc., Bank of America and MR Beal as advisers, as also Popular Securities as co-financial advisers, to assist in evaluating the execution of a long-term concession and lease of the airport. “This proposed transaction would be the first privatization of a major hub commercial airport in the US. The proposed transaction would be implemented under the Airport Pilot Privatization Program authorized by federal law and administered by the FAA,” it said. The original deadline for submitting request for qualification, a document proving the eligibility of a company to participate in a project, was supposed to be in March, but the airport has extended the deadline. It had received six bids initially.
Mint could not verify whether GMR and GVK were among those half a dozen bidders.