In-Principle Nod Granted for Privatisation of 11 Airports

The Public Private Partnership Appraisal Committee (PPPAC) has given in-principle approval to the Ministry of Civil Aviation’s proposal to privatize the operations, management and development of 11 Airports Authority of India (AAI) operated airports, grouped into five bundles under the Public-Private Partnership (PPP) model. The proposal is aimed at attracting private investment, improving airport infrastructure and ensuring the long-term viability of smaller airports through cross-subsidisation by commercially stronger airports.

The proposed five bundles comprise Amritsar and Kangra-Gaggal; Varanasi, Gaya and Kushinagar; Bhubaneswar and Hubballi; Raipur and Aurangabad; and Tiruchirappalli and Tirupati. Each bundle is proposed to be awarded to a single private concessionaire, with the bundling model intended to allow revenues from larger airports to support the development and operations of smaller airports within the same package.

The proposed concessions will have a 50-year term, with the private concessionaire responsible for the operation, management and development of the airports, including passenger terminals and city-side infrastructure. The bidding parameter would be a per-passenger fee charged for domestic passengers handled at the respective airports. Further, AAI will continue to provide air traffic control and communication, navigation and surveillance services, while its wholly owned subsidiary, AAI Cargo Logistics and Allied Services Company Limited (AAICLAS), will continue to handle cargo operations.

The proposed structure also seeks to address concerns relating to market concentration and financial leverage. The Ministry of Civil Aviation has indicated that the number of airport bundles that may be awarded to a single bidder will be capped, although the modalities of such cap are yet to be finalised. The Ministry has also proposed permitting bidders with relevant cross-sectoral infrastructure experience, rather than limiting participation to entities with prior aviation-sector experience.

The proposed employee transition framework provides for a one-year joint management period involving existing AAI employees. Thereafter, the private concessionaire will be required to retain 60% of AAI employees for up to three years, providing a transitional mechanism for the movement from public to private management.

The proposed airport bundles were identified following a phased and data-driven assessment undertaken by AAI. Initially, 12 major airports were assessed based on passenger traffic, land availability, commercial potential and financial performance, following which 136 smaller airports were evaluated for potential bundling based on factors including traffic potential, capital expenditure requirements, geographical proximity, city-side development potential and financial viability.

The proposal remains subject to further appraisal and procedural steps. Before seeking the final PPPAC recommendation, the Ministry of Civil Aviation is expected to undertake a market-sounding exercise with infrastructure players to assess the viability of the proposed bundling structure, following which feedback from private operators may result in modifications to the proposal.

The proposed privatisation represents a further expansion of India’s airport PPP framework, with the bundling model seeking to balance commercial viability with regional infrastructure development. For prospective concessionaires and infrastructure investors, the final concession structure, bidder concentration limits, employee-transition obligations and cross-subsidisation mechanism are likely to be key considerations as the proposal progresses towards the bidding stage.