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Can't pilot airports in rough weather: Adani Group

Adani won the bid for Ahmedabad, Lucknow, Mangaluru, Trivandrum, Jaipur and Guwahati airports.

, ET Bureau|
Last Updated: Jun 04, 2020, 08.11 AM IST
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MUMBAI: The Adani Group has told India’s state-run airport developer that it won’t be able to take possession of the three privatised airports in Ahmedabad, Lucknow and Mangaluru this calendar year due to the disruption caused by the Covid-19 pandemic. The infrastructure conglomerate has invoked the force majeure clause in the contract, several people in the know said.

The group has also asked the Airports Authority of India (AAI) to defer the deadline for payment of asset transfer fees of over Rs 1,000 crore for these airports from August to beyond December 2020, the people cited above said.

On February 14, the group had signed concession agreements with AAI to maintain, develop and operate the three airports. In 2018, it won the bid for six airports, which also includes Trivandrum, Jaipur and Guwahati but the concession agreement was signed only for Ahmedabad, Lucknow and Mangaluru.

The total asset transfer fees for six airports is worth Rs 2,000 crore, said two people in the know. The fees include upfront payments to contractors for development work already assigned by AAI.


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Separately, the GVK group has also cited the force majeure clause to nodal body CIDCO in Mumbai indicating it will be forced to delay the start of construction work on the Rs 16,000 crore Navi Mumbai airport project.

Force majeure refers to a clause that is included in contracts to remove liability for natural and unavoidable catastrophes.
Senior executives at AAI and CIDCO confirmed the developments and said their legal teams are looking into requests from Adani and GVK.

“The concession agreement is signed. Now Adani needs to draw and sign registration and adjudication documents and take possession of the airport. They have requested a deferment. We will try to get the money and transfer possession this financial year. It’s too premature to say anything else,” said a top AAI executive.

An executive at CIDCO was more specific and terse.

“We haven’t decided what to reply to GVK but this clause can’t really be invoked. We resumed work on the Navi Mumbai airport project a month back and there is no reason why GVK can’t,” he said.

An email to GVK remained unanswered. Adani Group declined to comment.

The Covid-19 pandemic has gravely affected businesses across the world, primarily tourism and air travel. Airlines and airport developers worldwide are staring at huge losses and have taken stringent measures such as laying off vast swathes of workforce.

In a note on Wednesday, credit rating agency ICRA said passenger traffic at airports will remain under pressure for the first half of FY2021, with some recovery likely only in the second half. On a full-year basis, passenger traffic is estimated to decline by 45-50% in FY2021, it said.

“Traffic recovery in a meaningful manner is expected towards FY2022 and that FY2019 passenger traffic levels of 345 million are likely to be surpassed only by FY2023,” it added.

Adani had cited aggressive concession fees while bidding for the six airports. Industry insiders said these now make no sense in the currently impacted business scenario.

According to figures from AAI, the number of passengers handled in FY20 rose 2.3% for Ahmedabad but declined 2% for Lucknow and 16% for Mangaluru. Similarly aircraft movements climbed 8% for Ahmedabad but declined 7.8% for Lucknow and 19% for Mangaluru.

The AAI executive said Adani’s request for delay would lead to a shortfall in revenue targets for the state-run airport developer. In the worse-case scenario, the group can forfeit bank guarantees or so-called performance bids submitted for the three airports. But the executive said it was premature to think on those lines.

The GVK-led consortium Mumbai International Airport Ltd which runs the current airport in Mumbai has won the bid for developing the Navi Mumbai airport.

In a recent webinar hosted by Sydney-based consultant CAPA-Centre for Aviation, MIAL CEO Rajeev Jain said the fall in business in its existing airport would impact upcoming capital intensive airport projects. He didn’t elaborate.

State Bank of India recently took over as the lead financier for the project after the earlier one backed out.

Earlier this year, GVK got into binding agreements to sell close to an 80% stake in its wholly owned airports business to sovereign wealth fund Abu Dhabi Investment Authority, India’s National Investment and Infrastructure Fund and Canadian pension PSP for Rs 7,614 crore.

The Navi Mumbai airport, first approved by the Maharashtra government in July 2008, is seen as a critical alternative to the existing airport in India’s financial capital. The new airport will be built on 1,160 hectares in phases. The initial concession period is 30 years from the appointed date and is extendable for a further 10 years.

(Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

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