Anguish in India as airport plans unveiled

India is intent on improving its dilapidated national airport network with a combined / public private funding package that will include selling off six major airports. Airlines believe it will add up to only sure thing - higher airport charges.

by CHIEF CORRESPONDENT, TOM BALLANTYNE  

November 1st 2013

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India has announced plans for an airport spending spree that requires a US$12 billion public and private investment package over the next five years. That is the good news. Read More »

The flip side for airlines is the decision to sell oft six major airports to help fund the the government’s part of the infrastructure upgrade, which is expected to lead to higher airport fees and landing charges.

IATA regional vice-president for the Asia-Pacific, Maunu von Lueders: does not favour privatising some India airports

At a recent conference in Dubai, India’s civicl aviation ministor, Ayat Singh, Singh said India’s second- and third-tier cities needed air connectivity and airport development but that Indian capital resources were insufficient to support the development of India’s aviation industry. He said: “We will be able to provide less than half of the capital needed. The rest has to come from outside and we need to allow that to happen.”

The six airports to be privatized, possibly by end of 2013, are Chennai, Kolkata, Ahmedabad, Jaipur, Lucknow and Guwahati. All of them have benefitted from government funded upgrades.

The International Air Transport Association (IATA) regional vice-president for the Asia-Pacific, Maunu von Lueders, wrote to the Indian aviation secretary, K.N. Shrivastava, and said the rational for privatization is “not clear”, declaring the need to sell the airports to solely private interests as unnecessary.

Airlines are particularly nervous about any potential increases in airport charges. They have already been hit with some large fee increases, including a 380% hike at New Delhi last year. In July, Hyderabad’s Rajiv Gandhi International Airport applied for a 100% increase in landing fees.

 IATA has asked the Airports Economic Regulatory Authority (AERA) of India to review the plan to sell the six airports, but AERA chairman, Yashwant S. Bhave, said the only rise since 2001 was a 10% increase in 2009, which was why the increased fees at key airports had appeared high.

von Lueders said: “If it is a question of bringing in external management expertise to augment the internal expertise of the AAI (Airports Authority of India) in improving revenue and performance at airports, this could be achieved without transferring ownership to the private sector,” he said.

KMPG partner and head, aerospace and defence, Amber Dubey, said existing PPP (public-private partnership) airports such as Delhi, Mumbai, Hyderabad and Bangalore were now among the best in their categories. Expanding PPP operations would “free up AAI’s bandwidth to focus on tier three and four airports, where the private sector may not venture due to low traffic and long break-even period.

“The revenue from PPP operators will shore up AAI’s financial position, and India as a whole will gain from this,” Dubey said.

In a keynote address in Indi, IATA director general and CEO, Tony Tyler, said the agenda to improve infrastructure, reduce costs and evolve a more reasonable taxation structure remained absolutely critical to India’s long-term success. “In terms of airport infrastructure, India has got a great deal right in previous years,” Tyler said. “However, future investment could be spearheaded through the Public-Private Partnership model that has delivered world-class facilities at Hyderabad, Cochin and Bengaluru.”

IATA says double-digit growth is expected to make India the world’s third-biggest aviation market by 2020, if government policies are aligned for growth.

The $12.1 billion budget is contained in India’s 12th Five-Year Plan for aviation and involves building 17 new airports. They will be at Mopa, Goa, Gulbarga, Bijapur, Hassan, Shimoga, Karnataka, Aranmula (Pathanamthitta) and Kannur in Kerala, Sindhudurg, Navi Mumbai and Shirdi, Darba, Karaikal, Kushinagar, Andal-Faridpur, Itanagar, Kishangarh (Ajmer) and Deoghar.

The governments’ strategy involves connecting more second- and third-tier cities now seen as being seriously underserved by air services.