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Adani’s bid to dominate India’s airport business

The Adani Group is in talks to acquire the GVK group’s 50.5% stake and other minority stakes in the Mumbai International Airport, a report by the Press Trust of India (PTI) stated.

If the above-mentioned deal goes through, the Adani Group flagship will become India’s largest operator of airports other than state-run Airports Authority of India (AAI).

Adani Enterprises has won the contracts to take control of 6 airports — Ahmedabad, Lucknow, Mangaluru, Jaipur, Thiruvananthapuram, and Guwahati. The conglomerate won the contracts after offering to share the highest revenue-per-passenger with AAI during a bidding process held by the Union government that concluded in February 2019.

These airports will be leased for operation, management, and development in a public-private partnership (PPP) model for 50 years. As per the civil aviation ministry, other airports like Delhi, Mumbai, Hyderabad, Bengaluru leased out on a PPP basis have witnessed the creation of world-class infrastructure in addition to helping Airports Authority of India (AAI) in enhancing its revenues.

At present, India has 136 commercially-managed airports by Airports Authority of India (AAI) and 6 under Public Private Partnerships (PPP) for operation, maintenance and development of airports.

The company solely outbid eight other companies in the bidding process to win the rights to manage the six airports. In its FY20 annual report, Adani Enterprises gave a glimpse of its ambition to be the largest private airport developer in the country, breaking the duopoly of the GMR and GVK business groups.

It aims for the airports’ division as developing world-class infrastructure at airports. The company is also betting big on its non-aero revenues where it plans to develop Airport Villages to also tap into non-passenger airport visitors by building infrastructure around airports.

With major airfields going to one bidder and the possible acquisition of the Mumbai airport, the dominance by one private owner in the industry may not leave enough space for others.

The centre’s move to lease the Thiruvananthapuram airport to Adani is being opposed by the Kerala government as the state government does not want to privatize the airport.

Kerala’s Chief Minister Pinarayi Vijayan said that the Centre should re-look at its decision and allow the state government to run the airport as a special purpose vehicle (SPV) in which the state government has a majority stake. He added that the state government agreed to match Adani’s quote, and, hence, the Centre’s decision to privatise could not be justified.

*An SPV is created as a separate company created by an organization with its own assets. It is generally used to isolate the parent company from financial risk.

On the other hand, Aviation Minister Hardeep Singh Puri had tweeted the reason why Adani was awarded the Kerala airport lease. ‘It was stipulated that if the Kerala State Industrial Development Corporation (KSIDC) bid comes within the 10% range of the winning bid, they would be awarded the work. There was a difference of 19.64% between them and the next bidder when bids were open’, his tweet stated.

On Monday, the Kerala assembly passed a unanimous resolution demanding the withdrawal of the centre’s decision to lease out the Thiruvananthapuram airport to Adani Enterprises.

Whatever happens with respect to the Kerala airport lease, looks like Adani is ready in attempting full-on domination in aviation anyway.

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