The Airports Authority of India’s (AAI) tender inviting bids for ground handling services for 76 of its airports may impact the disinvestment of Air India (AI) ground handling arm AIATSL, say potential bidders.
Within hours of the government inviting interest for 98% stake sale of Air India Air Transport Services Limited (AIATSL) on Tuesday, the Bird Group wrote to the transaction adviser Ernst & Young (EY), enquiring if the high royalties to the AAI, quoted by some entities which are likely to be awarded contracts for the 76 airports, would have to be matched by AIATSL’s new owner, according to its spokesperson.
Ground Handling Association comprising Celebi, Bird Group, Bhadra, Menezes and Swissport, have also written to EY with the same query, according to an industry source.
“If the response to our query is yes, then AIATSL becomes unviable,” the Bird Group spokesperson added.
“The outcome of the recently concluded AAI ground handling tenders could have a negative impact on this opportunity,” Celebi’s Murali Ramachandran said in a statement about the privatisation of Air India subsidiary.
AIATSL offers services to a total of 46 airlines at almost all of these 76 AAI airports.
According to sources, some bidders, likely to be awarded ground handling contracts, had quoted royalties of 15%-227% to the AAI.
According to AAI’s new regulations on ground handling, “at all airports, the joint venture or the subsidiary of Air India shall match the lowest royalty paid by the other ground handling agencies.” Airports that witness more than 10 million passengers will need to have at least three ground handling agencies, while those with less than 10 million passengers throughput can have up to three agencies.
Mr. Ramachandran also said that the preliminary information memorandum on AIATSL is “inadequate” and doesn’t provide details about “tenure, rights, contracts, national carrier flight handling rights, employees, etc.”
A source at AAI said that they will be issuing tenders for the 76 airports soon, and added that high royalties offered by bidders will encourage competition.
