The government is gearing up to invite bids from private companies to modernise clusters of non-metro airports. Interested parties have to bid for ‘bunches’ of airports rather than indulging in ‘cherry-picking’ to bag the most viable projects. Bunches will be created by clubbing some airports in a region as a bouquet which comprises potentially profitable as well as loss-making airports, highly-placed government sources said.

Civil aviation ministry has identified clusters of 5 to 6 non-metro airports that will be part of each bunch. In the first phase, the ministry has identified 35 non-metro airports to private parties for city-side development and modernisation of these facilities is expected to involve investment to the tune of Rs 7,000 crore.

While the state-owned Airports Authority of India (AAI) will take up the task of modernising the ‘air-side’ of these airports, private companies shall be roped in to develop the city-side. Investment in runways, parking bays and technical facilities would cost Rs 5,500 crore while the city-side amenities would attract investment of Rs 1,500 crore.

Bids from private companies would be only for city-side development, the sources said.

Air-side modernisation will involve developing the entire operational area including runway, taxiway, apron, communication and navigational aids, besides air traffic management systems. City-side involves non-operational areas including the terminal buildings, car park, restaurants, hotels and the entire area outside the operational boundary wall of the airports.

For city-side development, joint venture companies shall be formed in which AAI would hold minimum of 26% equity while the remaining stake will be offered to private parties. AAI’s JVs with private companies to develop the city-side shall be on revenue-sharing basis. The civil aviation ministry will use the revenues earned from the city-side to finance the air-side of the airports, sources said.

The non-metro airports shall be developed in three phases with 10 being developed in first phase, 10 in second and remaining 15 in third. Work on air-side development at 12 airports has already been started.

Phase one, which involves an investment of Rs 1,110 crore, is expected to be completed by 2008.

Meanwhile, AAI, which needs Rs 5,500 crore to modernise non-metro airports, is gearing up to raise funds over the medium term. AAI has appointed AK Capital Services as financial advisor-cum-lead arranger for raising debt. UTI Bank, ICICI Securities and Allianz Securities have been selected as arrangers to help AK Capital.

The advisors are assisting AAI in placement of bonds, other debt funding options, and in identifying the suitable time to tap the market. Initially, AAI will use internal funds to modernise these airports. The airport manager has made more than Rs 700 crore of profit after tax in the year 2005-06 , up from Rs 325 crore in the previous year. AAI will use the debt to modernise non-metro as well as metro airports.

The 35 non-metro airports are located at — Ahmedabad, Amritsar, Agartala, Agra, Agatti, Aurangabad, Bhopal, Bhubaneshwar, Chandigarh, Dehradun, Dimapur, Guwahati, Goa, Imphal, Jammu, Jaipur, Khajuraho, Nagpur, Madurai, Mangalore, Patna, Port Blair, Thiruvananthapuram, Pune, Rajkot, Ranchi, Raipur, Udaipur, Lucknow, Vadodara, Indore, Vishakhapatnam, Trichi, Coimbatore, and Varanasi.