Home >companies >Small airport project fails to take off as GVK pulls out

Bangalore/ Hyderabad: A plan to build low-cost airports in small Indian towns through a consortium led by Deccan Aviation Ltd, which runs budget carrier Deccan, has collapsed after one partner, the GVK Group, pulled out.

GVK’s action stems from UB Group, a conglomerate that also owns Kingfisher Airlines Ltd, agreeing to merge both airlines into one company.

The Deccan-led consortium had also included the private equity arm of Infrastructure Development Finance Co. Ltd (IDFC) and K Raheja Corp., a Mumbai construction firm. All four were equal partners in the venture.

Grounded: GVK Group chairman G.V.Krishna Reddy says the company pulled out of the consortium the minute Air Deccan was taken over by Kingfisher Airlines.

GVK, which operates the international airport in Mumbai, was to build and operate the airport; the Rahejas were to build shopping malls and industrial parks; and Deccan would operate dedicated flights to the airport from other cities, according to an initial agreement of the partners. IDFC’s private equity arm was to fund the venture.

The consortium was to bid for new airport projects in small towns in Karnataka, Andhra Pradesh and Maharashtra on ‘build, operate and transfer’ or BOT models.

“We have withdrawn from the consortium the minute Air Deccan was taken over by Kingfisher Airlines," said G.V. Krishna Reddy, chairman of GVK Group. Another official from the Hyderabad-based GVK, who requested anonymity, said the partners never found a “great opportunity" in building airports in smaller towns.

Executives at Deccan and IDFC confirmed the consortium stood disbanded. “It has been agreed mutually to dissolve the partnership," said a spokesman for IDFC.

G. R. Gopinath, chairman of Deccan, said the consortium did not take off as the Karnataka government did not provide free land to build the airport and other shopping and industrial infrastructure.

“It is been put on the backburner," said Gopinath, but denied the consortium had dissolved due to the entry of UB Group. “The change of governments in Karnataka did not help us."

Karnataka is currently administered by the central government after a coalition government collapsed. New elections to the state assembly are likely in March.

The Deccan consortium had expressed interest to build new airports in Shimoga, Bijapur and Gulbarga in Karnataka, but had not bid for the projects, said an official of Infrastructure Development Corp. (Karnataka) Ltd, the nodal agency for infrastructure projects in the state. The official did not want to be named, as he was not authorized to speak to the media.

The contract for Shimoga and Gulbarga airport was awarded to a consortium led by Maytas Infrastructure Ltd, a Hyderabad firm in November, another official said.  

UB Group, owned by billionaire businessman Vijay Mallya, already owns 46% stake in Deccan Aviation. Kingfisher expects to merge with Deccan by March, which would give UB a controlling stake of over 51%, Mallya said last week.


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