Wednesday, March 14, 2018

Airport infrastructure: Case for expediting growth

With its rapidly-growing economy, the fact that India needs significant investments in airport infrastructure cannot be overemphasised. While Public-Private Partnerships (PPPs) and privatisation of airports have been attempted to some extent, the time has come to accelerate the pace on this front.

The broader trend seen in infrastructure, of attracting global capital, applies as much to airports as to any other sector. As they say, "All Roads Lead to Rome" (implying that there are few roads to Rome). There are alternative ways of creating and financing airport infrastructure.
"Asset recycling" -- a strategy of monetising existing assets to generate capital -- eminently applies to airports. Asset recycling of existing airport assets will allow the government to monetise financially-viable projects to generate capital with which to finance other economically useful -- but not financially viable -- airports. This is an alternative to a viability gap fund strategy or a strategy of financing new assets using extra charges on air tickets. The asset recycling strategy needs to be looked at in greater detail, especially with a view to developing airports in tier-2 and tier-3 cities.

Airport operators and regulators also need to start thinking in terms of capital structure innovation around airport businesses. In terms of generating financing, the airport business can be listed through an IPO. This is an idea that has been around for a while in India. Globally, airport operators such as Corporacion America Airports are also looking at IPOs.
The cash liquidity that an IPO route provides without having to deal with the contingent liabilities of a debt structure can be useful in pursuing high-growth projects for airport operators. On the other end of the spectrum are financial instruments such as revenue-backed airport bonds. This would be a big step for airports and airport operators in India.
14/03/18 IANS/Economic Times