India considers up-front retail involvement in airport privatisations

Gavin Lipsith

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The Indian Ministry of Civil Aviation may require airport consortia to tie up with commercial partners before participating in future airport privatisations

The Indian government is considering a new model for forthcoming airport privatisations which could require interested consortia to work with retailers and other commercial operators before bidding, DFNIonline can reveal. Several sources including Indian government officials and retailers already operating in the country confirmed the development during last week’s TFWA Asia Pacific exhibition in Singapore.

Under the proposed model, airport consortia would be required to include a commercial plan including the retailers they would appoint if their bid was successful. The aim is to provide a more accurate projection of airport revenues, and has been greeted with mixed responses from retailers. Some surveyed by DFNIonline believe the model would lead to longer retail contracts, encouraging greater investment in retail facilities and a more balanced risk-reward equation between airports and tenants. Others believe the move is a way for the government to exercise more control over the retail and commercial operators involved in the airport business.

The Ministry of Civil Aviation is due to release the next batch of up to 26 airports to be privatised imminently. While the list has not been confirmed, it will include a combination of existing metro airports to be upgraded and new ‘merchant’ airports, to be constructed on greenfield sites.

One Indian retailer said: “This is our understanding of the process favoured by the Indian government at this stage, although it is still a shifting situation and could change before the privatisation plan is released.”

Another told DFNIonline: “We have held talks with the Indian Ministry of Civil Aviation and the line they are taking at the moment is that companies will need to have a retail component in place, specifying the retailers involved, as part of their bid.”

Another retailer suggested that the new model had resulted from frustration at the slow pace of development at the Indian airports already privatised, particularly at New Delhi Indira Ghandi and Mumbai Chhatrapati airports.