India's Ministry of Civil Aviation proposes new financial model for airport projects

India's Ministry of Civil Aviation proposed (14-Aug-2018) a new financial model for new airport development projects under the NABH Nirman scheme, partly with the aim of attracting increased foreign investment to new airport projects, including Jewar Noida International Airport, Bhogapuram Airport and New Pune International Airport. Details of the proposed model include:

• Extension of airport concession contract period from 30 years to 40 years;
• Concession fee per passenger proposal to replace revenue sharing proposal as bid parameter for airport privatisation tenders;
• Airport tariffs "shall be pre determined by the Concessioning Authority at the beginning of the Concession Period [and] shall undergo minor adjustments to account for inflation and certain eventualities over the Concession Period";
• Airport tariffs to be determined by "Maximum Blended Aeronautical Yield (MBAY) in terms of INR per passenger", rather than capital expenditure;
• MBAY of INR400 (USD5.7) per passenger for all greenfield airport project proposed for FY2018/19 based on "projected cash flow analysis for greenfield airports of different capacities and a review of aeronautical yields at Indian and global airports in the recent past".

The model is expected to remove incentives for airport operators to increase capital expenditure and operational expenditure "to demand higher tariffs" and decrease the cost of air travel to passengers by capping airport user fees. [more - original PR]