Navi Mumbai International Airport to throw up challenges for bidders

Navi Mumbai International Airport (NMIA) would be one of the last big PPP airport opportunities in India in the medium term and, hence, likely to see intense competition. Cidco projects that the airport will handle 10 million passengers in its first year of operations.
Airport bids are inherently more challenging than other infrastructure projects as they involve a complex interplay of non-aero (duty-free, F&B, etc) businesses with the core aero (passenger, aircraft and cargo movement) business, and the city-side property development. In addition, Navi Mumbai bidding brings in a unique set of challenges for the bidders.
This is the first instance of a secondary airport development in India. Whereas Bangalore and Hyderabad also had greenfield airports, in both these cities, the old airports were closed and the air traffic was shifted to the new airport. For a greenfield secondary airport, there is no base-case traffic number to start with.
The total air-traffic potential of the region and the quantum of shift are dependent on events that are not under the control of the developer.
The other critical aspect is the development strategy for the airport. The project costing can differ substantially depending on whether it's targeted as competing with the primary airport or as a supplementary, secondary airport. In all major cities like London, Frankfurt and Paris, secondary airports play a supplementary role, especially in supporting LCC traffic.
This also helps in optimising the available infrastructure. The better-located primary airport supports the premium international and domestic business travel, while a lower-cost secondary airport supports the LCCs, with much lower passenger charges.
The other important part is to understand the competitive behaviour and value drivers of different players. Whereas for, say, a GMR Group, this would be a standalone opportunity for consolidating its position in airports business, for other Mumbai-based developers, it could be part of a larger play of exploiting existing land banks in the region.
Bidders would need to quantify the motivations of their competitors to be able to anticipate the potential bidding behaviour.
26/11/11 Girish Shirodkar/Economic Times

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Categories: airports Nov 2011, New Nov 2011