Govt approves Air India JV for ground, cargo handling at Bangalore

The joint venture (JV) between Air India and Singapore Air Terminal Services (SATS) to provide ground and cargo handling services at the Bangalore airport received the government's approval today.

The joint venture was among the 23 FDI proposals cleared by the government, it was officially stated.

With this, the JV, Air India SATS Airport Services Bangalore, would be able to issue shares to raise resources, sources said.

Approval to the JV was granted on the basis of the recommendations of the Foreign Investment Promotion Board a fortnight ago, they said.

The government had last year in February approved the AI-SATS joint venture with 50:50 shareholding, with the total project cost of cargo and ground handling estimated at about Rs172 crore.

While the cost of cargo handling project at the new Bangalore airport was estimated at over Rs99 crore, an investment of about Rs73 crore was projected for the ground handling venture.

Air India, which has been handling ground and cargo services independently at airports across the country, had to go in for the JV with SATS as the tender floated by the Bangalore International Airport Limited calls for these services to be handled on a build, operate and transfer basis.

With a 50:50 debt-equity ratio, Air India's equity contribution to the cargo project would be Rs30 crore in the total share capital of Rs 60 crore. The balance would be borrowed from banks and financial institutions.
    
The joint venture firm for ground handling would involve an investment of around Rs72.78 crore, of which Rs50 crore would be share capital and the balance capital would be raised from banks as commercial borrowings.

The JV is also in the process of under taking ground handling activities at the Hyderabad International Airport with 50:50 shareholding.

It plans to take up ground handling at the Mumbai, Delhi and other Indian airports as well.

Air India's holding company Nacil leads the market share in ground handling business at Indian airports due to very little competition.