Privatization of Delhi & Mumbai Airports - A Bumpy Take Off
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Case Details:
Case Code : ECON016
Case Length : 21 Pages
Period : 2003-06
Pub Date : 2006
Teaching Note : Available
Organization : Airport Authority of India, Ministry of Civil Aviation
Industry : Civil Aviation
Countries : India
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Excerpts
Mumbai and Delhi Airports
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The Mumbai and Delhi airports combined handled the
bulk of Indian passenger and cargo traffic. Delhi and Mumbai airports
together, accounted for over 70% of total passenger traffic and 80% of
AAI's revenues (Refer Table III (A)/III (B) for Passenger Traffic and
Aircraft Landings/Take-offs at Mumbai and Delhi Airports). In 2000, the
International Air Transport Association (IATA) conducted a survey of the
biggest airports in the world. The airports at Mumbai and Delhi were
ranked amongst the three least favorable airports in the Asia-Pacific
region on all 19 service elements. The service at the two airports was
considered to be inadequate despite the airports having a large
administrative staff... |
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Call for Airport Development
The economic liberalization of 1991 was meant to liberalize the economy from the
stronghold of the GoI and to encourage private investment. The GoI also wanted
to create a tourism industry which would not only earn valuable foreign exchange
but would also create numerous jobs. It was at this time that the need for world
class airports at Mumbai and Delhi was felt by the GoI...
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The Privatization Process of Mumbai & Delhi Airports
In 2004, the Congress (I)-led UPA government came to power and
immediately announced plans to modernize the Delhi and Mumbai airports
by forming two joint ventures with private consortia. The GoI offered
74% of the ownership stake in Mumbai and Delhi Airports to private
players keeping 26% for itself. Of the 74%, Foreign Direct Investment (FDI)
from international airport operators was allowed up to 49%. The plan
included the development of airport infrastructure and the construction
of shops, eateries, etc, with a view to earning extra revenue... |
The Bidding Process
The bidding process for the privatization of Mumbai
and Delhi airports began in July 2004 when the GoI invited interested
parties to participate in the three stage bid process. The three stages
were - Request for Quotation (RFQ), submission of technical and
submission of financial bids with elimination at each stage. The last
date for submission of technical and financial bids was September 14,
2005. The bids were to be technically evaluated first. Only the
financial bids of the consortia which crossed the cut off per cent in
the technical evaluation were to be opened. The two consortia that
offered higher revenue share to the GoI were to be awarded the Delhi and
Mumbai airport modernization contracts...
Excerpts Contd...>>
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