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Changing dynamics of India's airport sector

Changing dynamics of Indias airport sector
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Changing dynamics of India's airport sector

Highlights

Of late, the country's airport sector is witnessing rapid changes

Of late, the country's airport sector is witnessing rapid changes. This is more so in the private sector currently dominated by GMR and GVK groups, both having their roots in Telugu States. India got its first private airport under public private partnership (PPP) mode when Cochin International Airport (CIAL) was opened in 1999. Over 10,000 NRIs invested in the project anchored by the Kerala State government.

Air India and other companies also chipped in with their investments. Subsequently, GMR Group, with roots in Andhra Pradesh, developed Greenfield Hyderabad international airport which commenced operations in 2008. After the successful execution of the Hyderabad airport, it went on to expand Delhi airport and executed several such projects overseas too. Hyderabad-based GVK Group also forayed into the airport sector by developing Bengaluru international airport. Subsequently, it expanded Mumbai international airport (MIAL), the country's busiest airport. The group is also in the process of developing Rs 20,000-crore Navi Mumbai International Airport (NMIAL), a Greenfield airport in Mumbai, in partnership with the Maharashtra government. Thus, GMR and GVK groups emerged as dominant players in the airport sector in India in the last one decade or so. But with the entry of Gujarat-based Adani Group led by billionaire Gautam Adani, the dynamics in the country's airport sector are fast changing now. In February 2019, Adani Group, which is a dominant player in ports and energy sectors, won mandate to operate, manage and develop six airports across India, thus emerging as the third biggest airport operator in the private sector in a short span.

They include Airports Authority of India (AAI)-operated airports in Ahmedabad, Lucknow, Jaipur, Guwahati, Thiruvananthapuram and Mangalore. Last week, the Union Cabinet cleared leasing out of Jaipur, Guwahati and Thiruvananthapuram airports to Adani. It will also get three other airports once Covid-19 threat subsides. The latest development is that Adani is in active talks to buy out the entire stake of GVK in Mumbai airport. GVK currently owns 50.5 per cent stake in MIAL that owns and operates the Mumbai airport. Airports Company South Africa (ACSA) owns 10 per cent stake while 13.5 per cent share is with Bidvest, also a South African company. In March last year, Adani Group signed a deal with Bidvest to buy its stake in the Mumbai airport for Rs 1,248 crore. But GVK blocked the deal by invoking its right of first refusal. However, GVK failed to raise funds to buy out Bidvest's stake and the issue subsequently landed in courts. In a surprise development, GVK recently landed in a CBI case for alleged misuse of funds to the tune of Rs 705 crore belonging to the Mumbai airport. The premier investigating agency alleged that GVK Group caused a loss of Rs 310 crore to the exchequer.

ED also registered a case on this. In these changing circumstances, debt-ridden GVK Group might have decided to exit from the Mumbai airport. If this deal goes through, Adani Group will emerge as the country's biggest private sector airport operator, pushing back GMR and GVK groups. Anyway, the increased presence of the private sector in the airports segment will benefit passengers as private airport operators provide world class facilities.

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