BackCentre allows airlines to invest up to 26% in Navi Mumbai airport
Airlines investing in the airport being built under a public-private partnership won't get board representation
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New Delhi: The civil aviation ministry has allowed Navi Mumbai airport being built through a public-private partnership, or PPP, to raise up to 26% of its equity from airlines, but has said investing airlines will not have any representation on the airport’s board.
Airlines are currently allowed to invest up to 10% of the equity of PPP airports, up from 5% few years back. Mumbai’s second airport in Navi Mumbai being built by City and Industrial Development Corp. of Maharashtra Ltd (Cidco) sought clearances from aviation ministry to allow this to be raised to 26%.
“Airlines can invest but they will not be given any board seat," said a government official who asked not to be identified.
The official said this was being done to ensure the investing airlines don’t get “undue benefits".
A 26% stake (enough to make or block decisions) and a board seat could allow airlines to dominate decisions at the airport.
The fear is that these could be detrimental to other airlines using the airport.
Airlines compete for better slots and other facilities at airports.
Mint reported on 19 June the controversial decision by Bangalore International Airport Ltd, which runs the Bangalore airport, to frame a new definition of what will be called a home airline for the airport—seen as a way of giving indirect sops to new airline AirAsia India.
On 5 February, Cidco floated a global tender for the proposed ₹ 14,574 crore Navi Mumbai airport spread over 1,160 hectares with the ability to handle 60 million passengers a year.
The government refused another demand of Cidco that the financial capacity of the bidding operator include net cash accruals apart from net worth, the same official said.
A second government official confirmed the move.
Cidco has now asked interested airport companies to send in their proposals by early September.
The Hochtief Group of Germany, a consortium of Ferrovial, S.A. and Macquarie Group Ltd, FMG Flughafen München GmbH of Munich, Aéroports de Paris of France, TAV Airports Holding Co. of Turkey, Malaysia Airports Holdings Berhad, ADC and HAS Airports Worldwide Inc. of Texas, Abertis Infraestructuras SA of Spain and Dublin Airport Authority plc of Ireland could be interested in the project, Mint reported on 19 February citing Cidco officials.
Hyderabad-based GVK Group, which already runs the existing Mumbai airport, holds the first right of refusal for developing the proposed airport in Navi Mumbai.
While it’s not clear which firms will invest, there are doubts about the impact of the government’s move.
“It might not achieve anything significant, at least for some time. Indian carriers are in no position to invest in airports and (we) don’t see interest from foreign airlines," said consulting firm CAPA’s CEO Kapil Kaul. “It is very unlikely that the airport will be operational before 2020."
Cidco has said it is targeting 2018 to open the new airport that was conceived in the early 2000s.
Airlines from West Asia, keen on making India a hub (and further feeding their own larger hubs in West Asia), may be interested, an executive at an airport firm said requesting anonymity. West Asian airline Etihad Airways recently acquired a 24% stake in Indian airline Jet Airways.
The word used in the aviation ministry policy is “airlines" which is being read to include both domestic and international airlines for a 26% stake.
Former Jet Airways CEO Steve Forte questioned the reasons behind the denial of board seats to airlines.
“In the US, airlines can buy/build terminals, hangars and other buildings of their own on airport grounds if such grounds are available and approved for expansion," he said.
“However, if the percentage of airline ownership does not allow presence on the board, then I would question the value and the interest of the airlines into contributing to the project, other than a share of the profit," Forte added.
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