Centre's plan to club unviable airports unlikely to enthuse investors

The Centre’s plan to club loss-making remote airports with a profit-making one is unlikely to draw much interest from investors, said executives of infrastructure companies and private equity funds.

They said the size of airports that are being privatised is small, which means investor interest will be limited. Clubbing such airports with “unviable” ones will make it even more unattractive. “Private equity investors want up and running assets that they can run efficiently and get returns on. They are not in the business of developing assets,” said a manager of a private equity fund, which has invested in infrastructure assets in India.  

Facing criticism that the policy of privatising profit-making airports is saddling the Airports Authority of India (AAI) with economically unviable airports and fostering monopoly in the sector, government is planning to rewrite how airports are privatised in the country.

Civil Aviation Secretary Pradeep Singh Kharola last week said the government will use a new approach for privatising airports — clubbing a profitable airport with a loss-making one, Kharola said. “AAI is examining the feasibility of giving a non-profitable airport and a profit-making airport as a package. We could see six to 10 airports being taken up,” he said. An Empowered Group of Secretaries, chaired by the Cabinet Secretary, has proposed that six unviable airports in a similar geography are to be sold as a package to the winning bidder. 

According to the initial plan, Varanasi will be clubbed with Kushinagar airport, Jharsuguda will be attached with Bhubaneswar, and Indore, and Tiruchirappalli airports will be clubbed with Jabalpur, and Salem airports, respectively.

“Funds have a lot of cash that they intend to invest, but only in the right quality of asset. Boards of infrastructure funds will be highly skeptical of writing cheques for non-descript assets. It will be very hard to convince them to invest in an asset that is not operational,” said an executive of an investment bank.

Airport monetisation is a crucial component of the Centre’s aggressive asset monetisation plan unveiled by Union Finance Minister Nirmala Sitharaman in the Budget for 2021-22. As part of this, the government will come up with an asset monetisation dashboard, which will be launched soon, to keep track of monetisation in various sectors. A national monetisation pipeline will also be developed to speed up the process.

An executive at an infrastructure firm said firms will be very careful while bidding as multiple infrastructure firms interested in airport operations are under heavy debt. “Companies that have airports are under stress as there is no clarity over traffic recovery. They will be very careful while bidding for new assets.” 

Fitch recently downgraded GMR group-owned Delhi International Airport’s long-term issue rating on its senior unsecured notes to ‘BB’ from ‘BB+’, while labelling the joint venture’s outlook as negative, due to significant travel restrictions put in place to curb the spread of Covid-19.

Zurich Airport which has got the mandate to build Greater Noida Airport will be one of the likely bidders for the assets. The company aims to have a portfolio of airports in India, its CEO Daniel Bircher had said.