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The Airports Authority of India’s (AAI) decision to award ground-handling contracts for 76 airports around the country could affect the divestment prospects of the ground-handling subsidiary of Air India, Air India Air Transport Ltd (AIATSL).
This is because several parties interested in bidding for AIATSL are now wondering whether they will have to match the bids which AAI has recently accepted to award the contracts. This is in keeping with the 2018 government policy which states that at all airports, a joint venture or a subsidiary of Air India shall match the lowest royalty paid by the other ground-handling agencies.
The AAI is said to have awarded the contracts for these airports at royalty rates which are said to be “exorbitantly high”, ranging from about 25 per cent to over 150 per cent of the revenues which the ground-handling agency earns at these airports. The established ground-handling agencies argue that if they have to match these bids, as the 2018 policy states, then it will not be financially viable for them to put in financial bids for AIATSL.
Bidders seeking clarity
A spokesperson for Bird Group confirmed that it has written to Ernst and Young seeking clarity on this issue. A spokesperson for Bhadra Group said that it had spoken to senior officials of Air India flagging their concerns about the bidding parameters for AIATSL.
Pointing out that Celebi Aviation is bullish about the whole opportunity and had sent in an unsolicited Expression of Interest even in 2017, Murali Ramachandran of Celebi Aviation said the primary information memorandum for AIATSL prima facie seems inadequate in terms of the information that it contains.
“We will have lot of queries especially concerning tenure, rights, contracts, national carrier flight handling rights, employees etc. We will table our list of queries in the next few days. We are concerned that the outcome of the recently concluded AAI ground handling tenders could have a negative impact on this opportunity” he added.
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