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Airport Seeks Incheon’s Help for Global Rank: Corporate India

Airports Authority of India, the nation’s biggest manager of the facilities, is seeking partners to help improve service quality in the world’s second-fastest growing air travel market.

The New Delhi-based state-run agency has had “initial discussions,” with companies that run Seoul, Singapore and Zurich airports, V.P. Agrawal, chairman of Airports Authority, said in an interview. Incheon International Airport Corp.’s Seoul facility was named the world’s best airport for service quality for a fifth straight year in 2011 by Airports Council International, an industry group. Changi Airports International Pte.’s Singapore facility was second.

A partner will help the operator of 97 percent of the civil facilities in India, which ranked below Ethiopia and Namibia in the World Economic Forum’s 2012 score for quality of air transport infrastructure, prepare for a targeted 54 percent jump in passenger traffic by 2017. International Air Transport Association forecasts air travel in India will rise 13 percent by 2016 making it the fastest growing market after Kazakhstan.

“It boils down to the quality of operations and maintenance which makes or mars an airport,” said Amber Dubey, partner at consultancy KPMG. “AAI has already built the assets, now it’s a matter of maintaining them in a nice way and increasing the level of service.”

Airports Authority, which ran facilities termed “prehistoric” by Infosys Ltd. (INFO)’s Chairman Emeritus N.R. Narayana Murthy in 2004, will publish global tenders seeking minority partners for its latest facilities in Chennai and Kolkata, after the agency’s board approves the proposal, Agrawal said.

Airport Infrastructure

India ranks higher than South Korea and Taiwan in terms of airport infrastructure, while the two North Asian nations have better quality, according to the WEF’s Competitiveness Report.

“It’ll be fantastic because the ownership remains with the government and India gets a chance to see world-class service,” said Dubey. “The quality of airports will definitely go up.”

The world’s second-most populous nation is building airports that can handle 370 million passengers by 2017, from 240 million last year. Airports Authority, which operated 125 airports last year, opened the terminals in Chennai and Kolkata last month.

Asia’s third-largest economy needs about $12.2 billion investments in airport infrastructure in the five years to 2017, according to the Planning Commission, an agency that designs five-year economic and social programs. In comparison, China requires $46.2 billion in the 10 years through 2020, according to an Organization for Economic Cooperation and Development report on transport infrastructure needs.

No Opportunities

Still, Fraport AG, the operator of Frankfurt airport, said in June it’s in talks to sell its 10 percent stake in New Delhi airport as its Indian operating license expires and the company doesn’t see new opportunities materializing.

Fraport can sell its stake only after May 2013, according to a Nov. 5 statement from partner GMR Infrastructure Ltd. (GMRI) that runs Delhi airport. The German company, which operates 13 airports globally, including Europe’s third-busiest in Frankfurt, is part of a group that won a 30-year concession in 2006 to run the airport in India’s capital.

In 2005, Changi partnered India’s Bharti Enterprises Ltd. and DLF Ltd. (DLFU) to bid for modernization of the airports in New Delhi and Mumbai. The company opted out of the bidding process because of concerns over some rules, according to a Civil Aviation Ministry statement. Incheon and Flughafen Zurich AG (FHZN) weren’t part of the six groups that bid for Delhi and Mumbai facilities.

Quality Measure

Airports Authority’s selected partners may receive payments linked to meeting quality targets, Agrawal said. The chairman will be measuring user satisfaction from passing through the airport, interaction with employees, cleanliness among other attributes, he said. The Airports Council measures waiting time at immigration, security and availability of baggage carts among others for service quality.

“If the partners help us achieve a ranking of 4.5 and above in user satisfaction, I’ll consider the job done,” he said. “The best airports manage a score of only 4.9.”

Changi doesn’t comment on market speculation, the company said in response to e-mailed questions about talks with Airports Authority. Officials in Incheon couldn’t be reached outside of regular working hours.

India currently has four airports that are controlled by private builders, in the cities of New Delhi, Mumbai, Hyderabad and Bangalore.

Second-Best Operator

Delhi International Airport Ltd., run by GMR Group, was named the world’s second-best operator for airports handling 25-40 million passengers in 2011 by Airports Council. Mumbai International Airport Ltd. was named the third-best in the same category.

Incheon, which operates South Korea’s busiest gateway, has been attempting to buy stakes in operators overseas.

It was among seven companies that passed qualification evaluation to bid for Myanmar’s new airport project, Korea Economic Daily reported on Jan. 6. The company last year made a failed approach for BAA Ltd.’s Edinburgh airport in Scotland.

Improving the quality of transport infrastructure is part of the requirement to achieve high growth by 2017, the Planning Commission said in its five-year program document. Efforts are on to empower consumers to demand quality services, according to the panel.

Improved service quality may also lure more travelers and help airlines including Jet Airways (India) Ltd. (JETIN), which posted profit just twice in the past eight quarters, according to data compiled by Bloomberg.

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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