AAI decision on contracts clouds prospects of Air India subsidiary
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.
