Possible Profitable Market Opportunities for Ferrovial in India

Economic factors

• Example of Jaipur International Airport declared by Airports Council International as the World’s Best Airport in the category of 2-5 million passengers and Sardar Vallbhbhai Patel International Airport considered as India’s eighth busiest airport by overall passenger traffic.
• The two airports are among the six put up for bids by Airports Authority of India for private partnership investment.
• Jaipur airport is currently congested owing to the existence of few terminals and it is already documented that the passenger volume grew by 30 per cent in the first four months of 2018
• It is estimated that India’s economy expanded by 7.7 per cent in the first three months of 2018 which is the highest growth rate since the second quarter of 2016.
• By 2030, India as one of the top 10 economies will be among the top seven emerging markets and India shall have surpassed the United States as one of the leading global economies based on purchasing power parity.
• Cargo transport is one of the areas that is underdeveloped but has potential considering that cargo volume rose by 17 percent to hit the million-tonne mark and will increase by 60 per cent in the next five years.
• India has one of the highest forecasts for airport infrastructure investment and it is estimated by Price Water House Coopers that around 14 billion dollars will be plugged into the sector.
• Companies like Zurich Airports from Switzerland, Incheon of Korea, Hochtief Aktiengellschaft of Germany and Vinci Construction of France are amongst the few that have shown interest in investing in the Indian market.
• Zurich Airports has even stated that they are considering bidding for any of the six airports up for privatization.

Political factors

• The Airports Authority of India estimates that each of the six airports would need an investment of approximately 200 million dollars.
• In the first round of privatization, Delhi, Mumbai, Bengaluru, Hyderbad and Kochi Airports were given out under a Public-Private Partnership (PPP) model.
• However, subsequent privatization arrangements have been changed so that AAI will be offering a concession period of 50 years to the winning bidder.
• The company will also be responsible for designing, financing, engineering, construction, and development of the airport infrastructure.
• Chetal Segan says that the political stability in India has improved business sentinel and it is the right time to invest in India
• The government has reiterated the fight against corruption and this has been supported by the courts, in fact, India as number 78 among the least corrupt countries.
• Laws such as Foreign Exchange Management Act of 2000, Companies Act of 2013, and India National Public Private Partnership Policy, govern foreign investment in India, and they must be complied with among other laws.
• India is facing a challenge of preventing terrorism and jihadist ideologies. However, this has not destabilized the country to a point of concern.
• The government has shown that it can partner with foreign investors in airline business by allowing 49 per cent stake in Air India
• Singapore Airlines and Tata have shown interest in jointly bidding for a stake in Air India, which is a sign that there are companies ready to partner in investment.

Environmental factors

• There are environmental legislations in India that provides for protection of the ecosystem by reduction of noise, waste and air pollution for airlines and these are found in legislations such as National Green Tribunal Act, Air Act, Water Act, Environment Protection Act and Hazardous Waste Management Regulations.

References

• Bagli, S. & Adhikary, M., (2014). FDI inflow and Economic Growth in India: An Empirical Analysis. Economic Affairs, 59(1), pp.23–33
• Graham, A. (2013). Managing Airports 4th edition: An international perspective. Routledge. Kim, H., 2010. Political Stability and Foreign Direct Investment. International Journal of Economics and Finance, 2(3).
• Mahalingam, A. (2009). PPP experiences in Indian cities: barriers, enablers, and the way forward. Journal of Construction Engineering and Management, 136(4), 419-429.
• News, L. and News, B. (2019). Govt to allow 100% privatisation of six airports in terms of operation, development and management; will offer 50-year lease - Firstpost. Available [online] from https://www.firstpost.com/business/govt-to-allow-100-privatisation-of-six-airports-in-terms-of-operation-development-and-management-will-offer-50-year-lease-5631151.html [Accessed 20 Feb. 2019].
• Nikkei Asian Review. (2019). India plans to build 100 more airports for 1bn flyers by 2035. Available [online] from https://asia.nikkei.com/Business/Business-Trends/India-plans-to-build-100-more-airports-for-1bn-flyers-by-2035 [Accessed 20 Feb. 2019].
• Raghunath, S. (2010). Airport privatisation in India: Investment opportunities in the next phase of development. Journal of Airport Management, 4(3), 235-251.