Saturday, November 30, 2019

Will Zurich's bid for Jewar airport challenge IGIA's monopoly?

New Delhi: Flughafen Zurich winning the bid for the proposed Jewar airport in Uttar Pradesh is likely to bring a paradigm change to India’s airport sector, threatening monopolies for the first time, said sector experts.

If the project is completed on time, Jewar airport — projected as the second such facility for the National Capital Region — will compete with GMR-owned Indira Gandhi International Airport (IGIA) from 2023 to attract air traffic. This could be a threat to IGIA’s monopoly on air traffic in north India, which has made it the crown jewel in GMR Infrastructure’s airport portfolio.
Zurich Airport offered a revenue share of Rs 400.97 per passenger. GMR, which had the right of first refusal (RoFR), offered Rs 351 per passenger. It would have had the chance to match the highest bid only if its offer was within 10 per cent of it.

“GMR’s bid was aggressive and rightly so, as they were desperate to win it because of a lot of synergy it offers with IGIA. That Zurich was able to outbid GMR, which had a RoFR, is something extraordinary. It doesn’t happen every day,” said an executive of a financial institution which invests in infrastructure projects.
Jewar is about 80 km from IGIA.

A six-year-long moratorium over concession fees to be paid to the government may give a buffer to Zurich. But, in the long term, completion of the project on time will determine its ability to compete with Delhi, said experts.

“The winning bid marks the re-entry of Zurich Airport in India. What is defining is the entry of an experienced player in a market that has GMR, GVK, Fairfax, and Adani. Their bidding number underscores their understanding of the Indian market and how important they think it is,” said Sidharath Kapur, former executive director at GMR Airports.
Capacity crunch in Delhi and Zurich’s ability to offer better services may make Jewar airport popular among India’s airlines that are frantically expanding their fleets but facing infrastructure crunch at major airports.

Delhi Airport is currently undergoing a Rs 9,000-crore upgrade to increase its capacity from 70 million fliers per annum to 100 million by 2022.

“After 2022, when Delhi finishes its fourth runway and terminal expansion, it has limited capability to expand capacity. Naturally, airlines and customers will have no other option,” said an airline executive.
30/11/19 Arindam Majumder/Business Standard
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