Aviation: Suresh Prabhu unveils new transaction structure for future Greenfield Airports

The MBAY for greenfield airports for FY 18-19 is proposed to be INR 400 per passenger. The number has been arrived at on the basis of 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.

Civil Aviation Minister Suresh Prabhakar Prabhu at a press conference along with MoS for Civil Aviation, Jayant Sinha and Civil Aviation Secretary RN Choubey on “New Model Concession Agreement for Greenfield Airports”. Image source: PIB

Civil Aviation Minister Suresh Prabhu today unveiled a new transaction structure for future greenfield airports proposed under NABH Nirmaan 2018, saying the new approach, to be finalised after due consultations with the stakeholders, will help boost investment and unlock the huge potential in the Indian aviation sector.

New transaction structure for future greenfield airports is being proposed with the guiding principles of affordability, sustainability and predictability, said a Civil Aviation ministry statement.

"The ‘Maximum Blended Aeronautical Yield’ (MBAY) in terms of INR per passenger shall be pre-determined by the Concessioning Authority at the beginning of the Concession Period. It shall undergo minor adjustments to account for inflation and certain eventualities over the Concession Period," it said.

The MBAY for greenfield airports for FY 18-19 is proposed to be INR 400 per passenger. The number has been arrived at on the basis of 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 bid parameter, which is proposed to be the ‘Concession Fee per passenger’ payable to the Concessioning Authority in terms of INR per passenger, will differ for each airport in line with its projected traffic, financial returns and risk profile, it further said.

In certain airports, where the proposed MBAY may not be adequate to cover expenses and risks, the concessioning authority may permit bidders to quote a ‘Negative Concession Fee’. The lowest negative fee will be added back to the proposed MBAY to arrive at the revised MBAY for that airport.

"The concession period is proposed to be 40 years. There will be a moratorium on the Concession Fee for a period of three years from the Commercial Operation Date (COD). The base rate of MBAY and the Concession Fee shall be indexed to 50% of inflation," said the statement.

Once every five years, the concessionaire shall propose the base rate of MBAY for the next five years, adjusting for inflation and the difference between the MBAY and the Concessionaire’s actual aeronautical yield in the previous five-year period, it said, adding the Concessionaire shall submit its proposed tariff card as per the MBAY and obtain the Regulator’s approval.

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Along with Suresh Prabhu, Jayant Sinha, MoS, Civil Aviation, R N Choubey, Secretary, MoCA and other senior officers of the ministry were also present on the occasion.

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