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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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Mumbai and Delhi Airports

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...

Economics | Case Study in Management, Operations, Strategies, Business Strategy, Case Studies

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...

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...

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