Other overseas entities that have shown interest include German airport operator AviAlliance, US financial investor Global Infrastructure Partners (GIP) and Sydney-based investment manager AMP Capital, the people said, requesting anonymity. Among Indian companies, Anil Ambani’s Reliance Infrastructure, the National Investment and Infrastructure Fund and Adani group, besides Indian airport operators GVK and GMR, are likely to participate in the bidding, said one of the two people cited above.
Six airports—Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangaluru—that are currently run by the Airports Authority of India (AAI) are up for bidding. The last date for submission of bids is 14 February and the letter of award will be issued on 28 February.
Redevelopment of these airports may attract investments worth $1.4 billion, according to Jagannarayan Padmanabhan, director and practice leader, transport and logistics, Crisil Infrastructure Advisory.
“Based on interactions that we have had with interested parties, each of the six airports roughly needs private investment of $200 million," Padmanabhan said. “Individual airports will have lower or higher investment requirements, but I believe it will be in the range of $1.2-1.4 billion that will come into the airport sector."
A spokesperson for Flughafen Zurich AG, the operator of Zurich airport, said the company was considering a bid, but did not specify for which airports. Changi Airports International said that it “continuously evaluates opportunities in airport projects" where it could add value and where there was a strong fit with its global strategy.
Spokespersons for GIP, AMP Capital, and AviAlliance declined to comment.
“GVK would be interested in participating in these bids as we firmly believe in the long-term growth of the Indian aviation sector. However, we would not be able to comment on the bid terms as we are still evaluating them," said a spokesperson for GVK. A RInfra spokesperson said the company was evaluating the opportunity, while a spokesperson for Adani Group declined to comment. An email to GMR remained unanswered at the time of publishing this story.
In November, the cabinet cleared the privatization of these six airports under the public-private partnership (PPP) model. At present, five airports, including Delhi, Mumbai, Bengaluru, Hyderabad and Kochi, operate under the PPP model, which not only “helped create world-class airports, but also helped AAI in enhancing its revenues and focusing on developing airports and air navigation infrastructure in the rest of the country," the government said.
In a departure from the framework used in the first round of airport privatisation undertaken more than a decade ago, AAI is offering a concession period of 50 years to the winning bidder, instead of 30 years. The concessionaire shall broadly be responsible for operations and management of existing airport assets as well as for designing, engineering, financing, construction and development of the additional air-side, terminal, city-side and land-side infrastructure for the airport. The winning bid will be decided on the basis of the highest monthly per-passenger fee to AAI, again a departure from the much-contested revenue-sharing model that AAI adopted in the existing privatized airports.
“India’s experience so far with airport privatization has been mostly positive," Padmanabhan said. “Delhi, Mumbai, Bengaluru and Hyderabad have been decent money spinners for their private sector owners. Even the six that are now up for privatization are all profitable and have been giving more than 10% compound annual growth rate over the last 4-5 years. Besides this, Jaipur and Ahmedabad are in crying need for capacity augmentation," he said.
Analysts concur that the success of the airport privatization plan will depend on how much freedom operators get in managing airports, something that has often been a bone of contention. “Private players are bound to seek more clarity on whether the government will make land available for expansion, the exit process and how favourable it is to them, ease of operations and the freedom that private party is given in operations and the fitness and transparency of data on current health of the airports that is given to them," said a senior infrastructure adviser, requesting anonymity.
India has the fastest growing aviation market in the world, despite some airlines faring poorly financially, according to the International Air Transport Association.
“Given the rapid airline passenger growth in India, capacity is being breached in multiple airports. So there is a definite business case for multiple airport developers and investors to take a positive view on the privatization proposal," Padmanabhan said.