Fraport Ponders Pullout From India

Germany’s Fraport AG, the second largest airport operator in the world, is considering selling its 10% stake in Indira Gandhi International Airport and pulling out of the Indian market. The operator already decided to shut down its Business Development Office this month, with its presence now limited to only a consultant role.

This pullout comes due to a loss of confidence in the government’s infrastructure development plans and execution. Fraport India’s Managing Director was quoted by the Economic Times as saying “…the government doesn’t have any spine or drive. So I personally doubt anything will happen in the lifetime of UPA-II.” This comes just after the prime minister announced major infrastructure development plans last week

Fraport India’s MD continued on to say, “Things will happen, but after the next elections in 2014 – when a new government comes in and finds its feet. So you are in 2015. I couldn’t justify sitting here till 2015 with no concrete opportunities to show.” Instead of the Indian market, Fraport plans to focus on other emerging markets like Brazil and China.

Fraport’s seven year agreement to operated DIAL expires next year. Fraport has signaled that they are strongly considering completely pulling out of India after that.

Fraport considering pulling out is a clear indicator of the lack of confidence in government that has caused growth to slow and FDI to drop rapidly. Hopefully this, along with the other bad news about the state of the economy (possible bond rating downgrade, far lower growth than expected, etc.) will help jolt the government out of its stupor so that infrastructure projects finally get moving, but I am not optimistic.