AAI eases bidding terms for Ahmedabad, Jaipur airports

Govt is trying to attract foreign players to build some of the 200 airports that the country needs

Airports Authority of India (AAI) has changed the tenure of the operations and maintenance contracts for the Ahmedabad and Jaipur airports to 20 years from 10 years, and will allow airline operators to bid for them in an effort to improve revenue for successful bidders.

“We have changed certain criteria as requested by interested parties,” Chairman Guruprasad Mohapatra said, adding several global players were interested in the two projects. 

The AAI plans to privatise the two airports except their airside facilities. The successful bidders will manage the passenger terminals, aprons and car parks. 

This is the second attempt by the government to involve private players in the two airports. Domestic airport operators GMR and GVK and global players Daa International Airport and Flughafen Zurich have shown interest in them.

AAI has decided to select the bidders on fee per passenger rather than on the more common revenue sharing formula, while increasing the tenure of the contract. “This will allow the operator to retain a higher share of the commercial outcome,” said an executive with a company that operates a private airport. 

GMR and GVK had objected to a revenue sharing model. The scope of the projects was small and a revenue-sharing model would not incentivise operators, the two companies had argued.

India and Singapore had in November 2015 signed an agreement for Singapore airport developer Changi to take up the management of retail space inside terminal buildings of the two airports and also car parking. The initiative, however, did not materialise.

AAI has also for the first time allowed airlines to bid for such projects. “There was a request from global players that have stakes in both airlines and airports,” an AAI official said. However, such entities should not have more than a 20 per cent stake in the bidding company. 

Few countries allow airlines to own airport terminals. Qantas owns domestic terminals in Sydney and Melbourne, while British Airways operates a terminal at JFK Airport on lease.

The government is also amending rules for new airports to provide certainty on how much revenue an airport operator can earn. “We are tightening the contracts so that private players can be sure about their investment,” Minister of State for Civil Aviation Jayant Sinha had said earlier. 

The ministry plans to change the Airports Authority of India Act and the Airports Economic Regulatory Authority (AERA) rules so that airports being bid out have pre-determined rates.

The government is trying to attract foreign players to build some of the 200 airports India will need in the next 15 years. “We need Rs 2-3 lakh crore to build new airports and most of the investment is going to come from private players,” Sinha said.

FLIGHT PATH

• Tenure of contract increased to 15 years from 10
• Revenue sharing model changed to increase incentive for successful bidder
• Airlines will be allowed to bid, however, with minority stake in firm
• Govt to fix quantum of revenue sharing in existing Operations, Management & Development Agreement (OMDA) to reduce uncertainty for investor