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Posts Tagged ‘Airline sector’

The Indian civil aviation sector is to undergo a major overhaul. There are substantial policy changes because of the shift in the government’s mindset—from considering air travel as elitist to making it available to many people. However, airports in India are unable to handle the increase in traffic. The Naresh Chandra Committee Report has identified a number of problems in the current system and has suggested improvements. The government decided to privatize airports to induce efficiency and avoid the burden of investments. This is in line with global trends where airports are being viewed more as businesses than infrastructure providers. The rationale for privatisation of airports has been a topic
of much debate and some critics argue that given the importance of airport infrastructure, private companies would overcharge passengers.

Cochin International Airport Limited (CIAL) in Kerala, a pioneer in India in airport privatisation, built the airport in Kerala in 1999—the only private sector airport in the country. CIAL merits special attention, as its financing, control and operations are unique in India. As the government did not have enough funds, it formed a private company that raised the funds from non-resident Indian (NRI) shareholders and several private companies (in exchange for exclusive rights to provide services at the airport, for example, Indian Oil). The company also negotiated complex deals for land requisition and airport buildings. Even though CIAL was commissioned on a build-operate-own (BOO) basis, the Airport Authority of India (AAI) still manages air traffic control (ATC) at the airport. Airport privatisation was a much-debated subject in India, with the leftist political parties and labour unions opposing the move initially on security grounds and then because of potential job losses. The security issue was settled with AAI remaining in control of air traffic and airspace at all airports. To allay fears over job losses, private companies have promised not to lay off workers for the next three years, after which 60% of the workforce would be retained.However, it has taken almost a decade for successive governments to reach consensus on the privatisation of airports, and decisions were made to set up greenfield airports in Bangalore and Hyderabad.

In September 2003, the government approved the restructuring and modernisation of the Delhi and Mumbai airports through the formation of two separate joint ventures. The two airports account for over 60% of the country’s airport traffic.

Amidst severe competition from the bidders, the Delhi and Mumbai airports were awarded to the GMR-Fraport and GVK-Airport South Africa consortiums, respectively, in early 2006. While the AAI and other public sector units hold 26% equity, 74% is held by the private sector. The new operators of Mumbai and Delhi, Mumbai International Airport Ltd and Delhi International Airport Ltd, respectively, are drawing up master plans to handle future growth. Planners in Mumbai also are preparing to start work on a second airport to take care of the city’s needs beyond 2015.
Since smaller airports have been experiencing strong traffic growth, the Civil Aviation Ministry is upgrading 35 airports.

AAI might offer landside property development in clusters of five airports to private infrastructure companies. The development will include retail, hotels, car parks, shopping malls and other non aeronautical revenue streams. The money raised from the bids will be used to develop airside infrastructure.

Airline sector
Airline sector-Organisation Chart