The government's decision to allow airlines to hold up to 10 per cent in companies bidding for the modernisation and privatisation of the Delhi and Mumbai airports came even after strong objections from ABN AMRO, the global consultant appointed to advice the government on the issue.
In its recommendations on the issue, ABN AMRO said that the universal approach taken in the case of international airports has been either to exclude airlines from ownership or to limit their participation to five per cent.
"The universal position taken in respect to airports that have been privatised has been to exclude airline or limit them to a cap of 5 per cent. Where the cap of 5 per cent has been imposed, in all cases there has nevertheless been no airline equity at all," ABN AMRO had told the government in its recommendations.
ABN AMRO had also told the government on June 2, 2004 that the ownership structure of major foreign airports which had private equity had no airline investors. In this context, it had quoted the examples of airports in Munich and Sydney.
"From our review of the ownership structure of the major airports that have some private equity, no airport has airline investors. Some of the airports such as Munich and Sydney have airline investment in specific terminals but in no case is there airline investment in the airport ownership company," it had told the government.
Pointing out the reasons for its opposition to allowing airlines hold stake in airports, ABN AMRO has said that in such a case airline's interests were focused on minimising aeronautical charges for itself, providing limited access to competitors to airports they control and limiting the cost and scale of airport development.
According to ABN AMRO, such reasons would lead to a direct conflict with the interest of the airline and airport operating company.
The global consultant has also warned the government that a 10 per cent stake would qualify an airline as a prime member and would be entitled for board positions.
On the issue of obtaining equity commitment from Indian parties at the expression of interest stage, ABN AMRO has said that such a move is likely to prove very difficult to achieve even with a significant extension of the timetable and may lead to the withdrawal of a number of major international airport operators.
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