10 . FORBES INDIA mARquEE . A SPECIAL mARKETING PRESENTATION . NOVEMBER 27, 2015

Airports are an integral part of the aviation industry. Privatisation of airports is not a new trend, but the success is often disappointing.

To Privatise or Not?Airports:

text by | yeshi seli

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FORBES INDIA mARquEE . A SPECIAL mARKETING PRESENTATION . NOVEMBER 27, 2015 . 11

W hen the economy was being liberalised in India in the early 90s, there was continuous emphasis given to upgrade and modernise existing airports. After crores were spent on upgradation and modernisation, emerged the debate of whether privatisation of airports was the best way forward – to keep pace with the increase in passengers and aircraft movement.

India today has five privately developed airports – Delhi, Mumbai, Hyderabad, Bengaluru and Cochin. Though the facilities are state-of-the-art, the cost burden has been passed down to airlines and passengers in the form of surcharges that include Airport Development Fee, User Development Fee etc.

Interestingly, airports developed by Airports Authority of India (AAI) are as impressive as the ones developed by private players – Chennai airport for instance has state-of-the-art facilities.

The question then is why has the NDA government taken a U-turn on privatisation of airports when they had opposed it in November 2014? They have stirred up a hornets’ nest by initiating the process of RFQ (request for qualification) for four airports: Chennai, Kolkata, Jaipur and Hyderabad.

“AAI has excellent designers, architects and engineers who pitched their level of competence to their vision while modernising airports across the country in spite of the restrictions they faced due to government control of finances. For instance, during my tenure, our board had approved modernisation of Delhi airport which would cost R800 crore. This request was turned down for being excessive! Ironically the GMR-led Delhi airport cost a whopping R12,500 crore against the estimate of R5,000 crore (an addition of R7,500 crore). Such is the state of affairs,’’ laments AVM Hamid Shahul, who was the first chairman of AAI (it was formed after the merger of the National Airports Authority and the International Airports Authority in 1995).

“In addition to the cost overrun the passengers and airlines have to bear the brunt as they are made to pay huge surcharges making flying by air a costly option,’’ AVM Shahul added.

A similar view is shared by CMD of Air India Rohit Nandan, he says, “There is nothing per se good about privatisation. We have started thinking about privatisation as some sort of a panacea which it is not.’’

Meanwhile, this hasn’t gone down well with members of Airports Authority Employees Union (AAEU) as they

To Privatise or Not?IndIa today has fIve prIvately developed aIrports – delhI, MuMbaI, hyderabad, bengaluru and CoChIn.

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12 . FORBES INDIA mARquEE . A SPECIAL mARKETING PRESENTATION . NOVEMBER 27, 2015

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had threatened to strike work a few times. “In our view privatisation of these four airports is a violation of the Tripartite Committee recommendations which were agreed upon by the government,’’ says AAEU general secretary Balraj Singh Ahlawat.

“The government has already spent R5,000 crore in modernising and upgrading these airports and

handing them over to private players is not the way ahead. The privatisation of earlier airports under UPA was a scam,’’ Ahlawat said adding that their biggest apprehension was layoffs as there was no guarantee of 100% absorption.

The Union has been demanding a tripartite agreement between the government, AAI and themselves on the lines of the pact between Delhi Vidyut Board, government and employees in the year 2000 before privatisation of power. This agreement spoke of 100% absorption of DVP employees.

Those interested in bidding for these four airports include: Adani Ports and Special Economic Zone Ltd; Bhadra International (India) Pvt Ltd; Egis India Consulting Engineers Pvt Ltd; Flemingo Duty Free Shop Pvt Ltd, GMR, GVK, International Business Development Flughafen Zurich and Seimens.

“The government will do whatever is in the ‘interest’ of the country as far as airport privatisation is concerned,’’ says Union Civil Aviation Minister Ashok Gajapati Raju.

Airlines too are apprehensive of privatisation as they fear this would add to their financial burden by increasing operational costs.

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FORBES INDIA mARquEE . A SPECIAL mARKETING PRESENTATION . NOVEMBER 27, 2015 . 13

According to IATA, “Over the past three years the airport charges borne by airlines have increased by 346% in Delhi and 164% in Mumbai. In Chennai and Kolkata (which have been modernised) the charges have gone up by 269% and 385% respectively. For instance, Air India is required to pay 87% more airport charges in Delhi to land a Boeing 787 Dreamliner than it paid at Singapore and landing a Boeing 777 ER Dreamliner costs the airline 230% of the costs in Dubai.’’

IATA, which represents 250 airlines across the globe, says through privatisation a commercial flavour may be introduced but the country or government can’t make more money.

However, there are some who believe that privatisation isn’t such a bad word.

“As India aspires to be the third largest market – after USA and China – by 2020, it is imperative that it has an efficient and functional infrastructure. This objective can only be achieved if the airports are privatised with a strong, incorruptible regulatory agency to exercise control on navigational, landing, parking and user development charges levied by airports. Once privatised, airports should be mandated to recover their expenses through both aeronautical and non-aeronautical earnings so that the airlines and passengers, around whom the aviation industry revolves, are not burdened beyond a point as India is a price sensitive market,’’ says Jitendra Bhargava, former executive director Air India.

India has 125 airports out of which 11 are international, eight customs airports, 81 domestic airports and 25 civil enclaves at military airfields. The AAI is responsible for creating, upgrading, maintaining and managing them, barring the ones that are privately developed.

Whether the four said airports are actually going to be up for privatisation or not – time will tell. But it’s not going to be an easy decision as the government will have to deal with many challenges before that!

IndIa has 125 aIrports out of whIch 11 are InternatIonal, eIght customs aIrports, 81 domestIc aIrports and 25 cIvIl enclaves at mIlItary aIrfIelds.

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