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'All big airports have space problems'

The Civil Aviation Minister talks about Indian airports to Sandeep Bamzai and Arun Kumar. Indian airports' wishlist

india Updated: Dec 08, 2005 15:36 IST

The liberalised aviation policy has suddenly led to an explosion of traffic at airports. It seems infrastructure was not ready for this. Shouldn’t we have first developed infrastructure and then changed policy?
It is a debatable issue. Clearly, there are two models for growth. There’s the Chinese method where you first develop infrastructure and await economic growth, which is primarily supply-driven. In that case, you have upfront investment and that too of exorbitant magnitude. The second model is demand-driven growth. This might initially have teething problems but I strongly believe it is more sustainable in the Indian context. I think everyone has realised that the Delhi and Mumbai airports will get a radical makeover.

More importantly, what are we discussing? A three-hour congestion in the mornings and evenings at Mumbai and Delhi? The biggest and most sophisticated airports face similar problems at certain points of time. Such issues will remain there even if these two airports are developed significantly.

But at the same time, we have other airports in the country that we tend to forget about. Is there any congestion at these airports? The answer is no. India is not just Delhi and Mumbai. You need to take a holistic view. And I believe the spurt in demand will help bring all-round growth in the aviation sector.

But we are facing a serious problem of parking bays even now when we have only around 125 aircraft — which will increase to nearly 450-500 shortly. How will you cope with such issues?
There are problems. But again, I would like to reiterate, don’t look at these two airports alone. There is need to look around for parking bays. I believe there is a need to develop and modernise other airports, which will ease the pressure at these two airports.

See the change that has taken place, almost all leading airlines have started flying to Bangalore now. This clearly demonstrates that there are new markets. You just need to have a vision to exploit them.

We’ve heard of the merger of IA with A-I. When will this be completed?
It is difficult to give a timeline on such a complicated subject. But, I strongly believe synergising the operations of both airlines is critical. A-I is operating on international routes and is now targeting the domestic sector to meet the growth in demand, while IA, which is strong on domestic routes, is aspiring for bigger play abroad. I strongly believe there is a need to have a strategic alliance between the two airlines at the earliest. Once they enter into such an alliance, then we will evaluate the merger.

But will it happen before the public issues of these two airlines?
A merger is a complicated subject and cannot be done in a hurry. The public issues are the first priority for both airlines as they are in the midst of expansion plans and require fund infusion. Since the government isn’t funding the flight acquisition plans, they have to raise resources.

Is the government also raising funds through a clubbing mechanism with the initial public offer of these airlines as it did in the case of NTPC?
No, the government doesn’t intend to raise funds by divesting its own stake in the market. These companies will make fresh issues of shares up to 20 per cent of their enhanced paid up capital. In addition, five per cent of the paid up capital will be offered to the employees of both airlines. Therefore, post-issue, government stake will automatically come down to 75-80 per cent.

How much will A-I and IA mop up?
The size of the issue is a function of the valuation of these companies. A-I has just appointed an investment banker while IA is expected to appoint one shortly. It will take some time for them to evaluate. However, we are confident to complete the IPOs in the current fiscal ending March 2006.