The Dubai government-owned aerospace, manufacturing and services firm, Dubai Aerospace Enterprise (DAE), is looking to invest in building new airports in India and modernizing existing ones in partnership with local players. If successful, this could be the second Dubai government-owned firm, after Dubai Ports World, to set up operations in the country.
“We are keeping a close eye on India, the fastest growing global aviation market. We intend to bid for everything from the Chennai airport development to the second airport at Navi Mumbai as well as non-metro airports. We are speaking to a range of local partners and want the best ones for each project,” says Kjeld Binger, CEO, Dubai Aerospace.
The company is looking for local partners who can help build airports and also comply with the provisions of limits of foreign direct investment in non-greenfield airports’ development. The government allows foreign investors to hold 100% in an airport built from scratch. But for existing airports which are to be modernized, the policy is less liberal.
“Leveraging the strength of the Dubai International Airport (DIA), we will take charge of master planning and business planning (of the airports won) with construction left to the partner,” says Binger.
DIA has also been successful in increasing non-aeronautical revenues to 60% of total. These revenues are generated via the duty-free zone, selling ads in the airport terminal, making money from car parks and car rentals and even a five-star hotel at the airport. “The reduced dependence on aeronautical revenues helps us to aid airlines that are under tremendous pressure to reduce costs,” says a spokesperson of Dubai’s department of civil aviation. In the Indian market, where the Union government and loss-making airlines are both focused on keeping costs low, this approach might find favour with the state and stakeholders alike, say analysts.
“We will look at projects with a certain critical mass to bid for in India. Nothing is too big but something could be too small for us. That said, even the smallest airstrip in India has a tendency to grow very fast. But we would not be looking at a general aviation (merchant airport) in India. We would like to look at projects which at least have a potential to do a million passengers a year,” says Binger.
DAE feels that it needs a certain size to focus management attention and time, and achieve its aim of developing the next generation of airports powered by hi-tech services and smooth passenger flows. “At Dubai, we have put in place massive systems for identification of baggage, easy access to facilities and smooth immigration,” says Binger, who feels they can do this in India, too.
The company, initially capitalized at $1 billion (Rs4,100 crore), has a commitment from the Dubai government for an investment of $15 billion in all. It is also looking to set up facilities for maintenance, repair and overhaul of engines in India. Most airlines in India have to send their aircraft overseas for advanced flights’ checks which are mandatory under international safety regulations. By providing the same facility in India, airlines will save substantial amounts of costs and time by leveraging the cheaper talent pool.