Business

AAI cancels ground handling tender

Terra incognita: Objections were raised about royalties as high as 226% quoted by some entities.

Terra incognita: Objections were raised about royalties as high as 226% quoted by some entities.   | Photo Credit: A.Muralitharan

Move follows concerns over some short-listed bidders offering steep royalties

The Airports Authority of India (AAI) has cancelled its tender for ground handling services at 76 airports following concerns over some short-listed bidders offering steep royalties.

“A decision was taken on Monday to cancel the tender. We will now have to start a fresh bidding procedure,” AAI Chairman Guruprasad Mohapatra told The Hindu.

Several delays

The tender procedure was initiated last year in May, but faced several delays. In January, AAI short-listed bidders and asked other players to match the bids when objections were raised about royalties as high as 226% quoted by some entities and how that would make ground handling business unviable in the country.

“The bidding and selection should be based on technical capability-related qualification and financial strength of bidders,” a senior executive at a leading ground handling company commented on AAI’s decision to float a fresh tender.

The bidding process undertaken by AAI also deterred players from participating in another tender floated for disinvestment of Air India’s subsidiary for ground handling, Air India Air Transport Services Limited (AIATSL), in February. Industry players said that if AAI awarded contracts to ground handling agencies quoting steep revenue share for a particular airport, it would impact AIATSL’s profitabality as it would also have to offer the same revenue share to provide services at that airport as per government regulations. AIATSL is present at all 76 AAI airports for which bids were invited.

While the Ministry of Civil Aviation will hope that with the cancellation of AAI tender it will be able to speed up disinvestment of AIATSL, ground handling agencies will still need some reassurance. “The AAI should not run a similar tender again after the sale which would be detrimental,” said the above quoted industry player.

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Printable version | Jul 15, 2020 6:07:57 AM | https://www.thehindu.com/business/aai-cancels-ground-handling-tender/article27819698.ece

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