PE firms jump on airport bandwagon

Persisting losses of domestic airlines has led private equity and venture capital firms to look for investment in aviation infrastructure, such as airports and maintenance, repair and overhaul (MRO) facilities. Some of the funds looking at the segment are Citi Group, ICICI, Och Ziff, 3i and IL&FS.
With several greenfield airports, major and minor, coming up, these firms are bullish on aviation infrastructure. A major factor luring these companies is the increasing non-aeronautical revenue of airports.
“With ATF price moving north on account of spiralling crude prices, we cannot expect airlines recording profits, at least in the near term. Other input costs, such as maintenance of aircraft and salaries, are skyrocketing — denting the profits of carriers. Considering this scenario, aviation infrastructure seems to be a safer option,” said Shailesh Pathak, director (investment) at ICICI Venture.
Most of the international airports in the country, mainly owned by the public sector undertaking, Airport Authority of India (AAI), are profit-making. Lured by the profitability of airports, some private sector infrastructure majors like Bangalore-headquartered GMR and the Hyderabad-based GVK Group have joined the airport bandwagon.
PE firms have shown long-term interest in airport development. While IDFC holds 3.9% in DIAL, the GMR-led combine developing and operating the country’s second busiest airport, Och Ziff has a minority stake in Pragati47, a company building an aerotropolis near Durgapur.
15/11/07 Nirbhay Kumar & Gaurie Mishra/Economic times

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Categories: Airports Nov 2007