Private Sector Targets Airport Development In India And Abroad

Airports

Aviation Daily Apr 23 , 2010 , p. 17
Neelam Mathews

Driven by a robust economy, India is increasingly focusing on developing and upgrading its airport infrastructure.

Private companies in India are eyeing airport space as limited ground- and cargo-handling capacity at major airports provides opportunities for airport developers to grow.

The trend is catching on. Reliance Airport Developers, which won a bid to operate five airports in the western state of Maharashtra on a 99-year lease, is now looking to develop eight regional airports in Tier 4 cities.

Indian companies are also exploring opportunities abroad. For example, Reliance is one of the three Indian companies to be shortlisted to bid for the privatization of the Male International Airport in Maldives. The other two are GMR, which owns the Delhi and Hyderabad greenfield airports, and GVK, owner of the Mumbai and Bengaluru greenfields.

Engineering and construction giant Larsen & Toubro, which was involved in design and construction work, as well as runway and associated projects at Delhi Airport, plans to bid for airports in Oman and Abu Dhabi. The company won a contract seven years ago to build a twin-berth hangar capable of housing two large commercial aircraft for the royal flight at Seeb Airport in Oman.

GMR, which along with consortium partners won the bid to develop Istanbul Sabiha Gokcen Airport, opened the airport last year, one year ahead of schedule. The new international terminal. which is designed to handle 20 million passengers, was built for $606 million with a 20-year concession period.

In India, however, issues remain. “It is true that airports drive economy or can do. However, there are airports in India that don’t do anything. There are so many non-functional airports in non-metros,” Ansgar Sickert, Fraport's managing director-India, told The DAILY.

Problems with land clearances and the high cost of funding are another challenge. “Because of the capital-intensive nature of the airports, the initial years are characterized by high levels of depreciation and interest payouts, which reduce profitability.As the airports become more established, the interest expenses and levels of depreciation are very low,” says a recent Frost & Sullivan report on airports.

The uncertainty of policies is becoming a major pain point. Many greenfield airports are in the offing but have not been cleared because of bureaucratic hurdles. Plans to upgrade 35 non-metro airports simultaneously were shelved. Only 10 were chosen for city-side development under public/private partnerships.

“We had expected more development and are ready to participate should the opportunity arise,” says Sickert. Recently, Thomas Donohue, U.S. Chamber of Commerce president and CEO, told business leaders in India, “We want to build many of your airports." However, an analyst told The DAILY, "India will need to revisit its commitment and policy on airports to ensure investors don’t run away.”