Privatizing small airports, not the right approach

Privatizing small airports would not be the right approach for the government as they required to be viable in terms of passenger size and growth projections, a senior official of GMR Airports said.

“If the government wants to look at privatizing small airports, in my experience that is not the right approach. The right approach would be that they look at privatizing more profitable airports, which now they are doing,” SidharathKapur, executive director and board member, GMR Airports, stated at CAPA India Airports Summit 2019 here.

The Central government has invited bids for the privatization of six airports — Lucknow, Jaipur, Ahmedabad, Guwahati, Mangaluru, and Thirvananthapuram. These airports are recently under the control of the Airports Authority of India (AAI).

“I think there is always a nominal size where an airport is viable (for privatization),” Kapur said.

“The cost recovery models of these assets demand that there should be fixed minimum traffic size. I guess 2.5 million to 3 million passengers (per year) is the ideal traffic size to make sense. And based on that, the growth coming makes sense of the large capex (capital expenditure) involved,” he further said.

Kapur said GMR Airports — that presently manages Delhi and Hyderabad airports in India — does not mind looking at smaller assets. “But in all these assets we see if there is huge growth potential. Each and the Indian assets, especially the smaller ones, and the ones which are currently under privatization, the growth potential is huge,” he added.

However, he further stated that “smaller airports do not make much sense from a private concessions point of view”.

He said the government should aim at building smaller aerodromes from the revenues of bigger airports that have been privatized.

“Delhi and Hyderabad constitute 85 percent of the revenues of the Airports Authority. This can contribute to the kitty of the government and they can utilization this cash to construct airport infrastructure in underdeveloped and developing areas. Where there are no airports, they can build some airports, even if the traffic is around 100,000 passengers,” he stated.

He said his company is not averse to greenfield airports either. “We continue to look at them. Our preference, as anyone’s else preference, is brownfield assets that are running assets. The construction risk is not really there,” he stated.

“I would call the Indian greenfield assets as not truly greenfield. I would say they are more of a Whitefield because in most cases — except Goa which was an exception — the existing airport is shut down,” he said. “Our Delhi and Hyderabad (airports) are for sure large assets…we will continue to look at international forays. We will continue to look at domestic assets because that is our home market,” he said.

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