AAI Bidding for Bhogapuram Airport: From Authority to Bidder

Case Solution

Ganesan Raghuram, Gopi S Gopikuttan
Indian Institute of Management-Bangalore ()

The Airports Authority of India (AAI) was established under the Airports Authority of India Act 1994 as a statutory authority with the main tasks of controlling and managing the airspace of India. As of March 2017, AAI managed a total of 125 airports, including 11 international airports, 08 customs airports, 81 national airports, and 25 civil enclaves at defense aerodromes. By 200506, AAI airports handled 100% of the country’s passenger traffic. The participation was reduced to almost 60% in 200607 and more to 40% in 200809 due to the cession of some airports to private agents. Over the years, AAI has been concerned about its declining market share and the possibility of more and more airports being developed outside of its control. The Department of Civil Aviation (MoCA) increasingly encouraged state governments to develop airports, where possible through public-private partnerships (PPP). AAI participated as a bidder in the Mopa airport tender, Goa. It lost the offer to GMR Airport Limited (GAL), which belongs to the GMR group. An offer was in the offing for another airport in Bhogapuram, which would serve Visakhapatnam in Andhra Pradesh. This airport was intended to replace the existing civil enclave at Visakhapatnam Naval Airport. This case focuses on whether AAI should bid for Bhogapuram. Lessons can be learned from experience with Mopa’s bidding process.

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