TLI Staff
New Delhi: With private investors and airport developers set to have conservative view on revenue and traffic projections in the wake of business disruptions caused by Coronavirus outbreak, industry insiders have raised questions over government move to privatize six more Airports Authority of India (AAI)-run airports in the coming months.
They argue that private parties would quote much lower revenue share for any airport project given that aviation is one of the most battered sectors and its close link with travel and tourism suggests recovery may not be quick.
No wonder, executives of many global airport firms including pension funds from the US, Fraport AG, Zurich Airport and private equity firms in a close-group discussion this week expressed apprehension over recovery in the sector. Sources said that some of the airport firms hoped recovery in the aviation sector may take 2-3 years despite vaccines for the deadly virus being developed.
“Not only traffic projection would be conservative, commercial real estate would also be muted in coming 8-12 months. Keeping this in mind prospective bidders would quote much lower revenue share and government would stand to lose heavily over the long-term concession period,” said an investment banker advising infrastructure companies.
“It raises questions on why government is going ahead with privatization. In such a negative sentiments why it is going ahead with the plan. It is certainly not great time to push for privatization,” he added.
An executive familiar with the discussions in the close-group of global airport developers and investors said that most executives representing these firms were of the view that acquisition and development of new projects would continue but at much slower pace in the short as well as medium term.
“An executive representing a US-based airport firms said that without access to stimulus package announced by the Trump administration it will be difficult to survive,” the person quoted above said.
The close-group of infrastructure sector big boys discussed various issues in a webinar with Indian sector experts also participating.
In a high-level review meeting chaired by Prime Minister Narendra Modi on May 1, the nodal Civil Aviation Ministry was asked to expedite the process of handing over of 6 more airports on PPP basis by commencing the tender process within three months.
“For generation of more revenue as well as to bring in more efficiency at the airports, the Ministry of Civil Aviation has been asked to expedite the process of handing over of 6 more airports on PPP basis, by commencing the tender process within three months,” an official media statement said.
Despite vehement opposition from AAI unions, the Modi government late last year cleared the plan to lease out 6 airports namely Varanasi, Amritsar, Bhubaneswar, Trichy, Indore and Raipur for operation, management and development under public private partnership (PPP).
Following AAI board’s approval, the Aviation Ministry circulated draft cabinet note for comments from key ministries on the proposal.
Earlier, the government had bid out six private airports on per passenger revenue basis. Gujarat-based Adani Enterprises had won the rights to operate, manage and develop these airports for a period of 50 years.