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Airports to become world-class! AAI hikes capital expenditure significantly to upgrade infrastructure

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From privatisation of well-served airports to upgrade of the infrastructure at several others, the Airports Authority of India (AAI) has its task cut out if it is to meet the challenges of the world’s fastest growing aviation market. After a successful round of airport privatisation earlier this year, the AAI has set the ball rolling to offload more aerodromes from its kitty in the coming months. At the same time, the authority has significantly raised capital expenditure for airports under its control.

For the next privatisation round, the AAI is looking at airports which have logged significant increase in traffic but whose infrastructure has not kept pace with such growth. According to sources, it is studying around 10 airports that it intends putting on the block under the public private partnership (PPP) model. These may include airports at Varanasi, Calicut, Patna, Amritsar, Bhubaneswar, Ranchi, Coimbatore, Trichy, Indore and Raipur. For instance, footfall at the Patna airport in 2017-18 was more than four times its capacity of 0.7 million passengers per annum. Similarly, Bhubaneswar and Coimbatore breached their passenger handling capacity in 2017-18.

The AAI wants to deploy more resources to develop airports in unserved areas while maximising revenues from well-served units under the PPP model. “The only way airports can be developed around the country is if the private sector comes in and the government moves to developing under-developed airports. Revenues for AAI have improved of late because of the revenue earned from privatised airports and redeployment of manpower,” said Guruprasad Mohapatra before demitting office as the chairman of AAI last month.

“In the medium term, the strategy to privatise tier-II and tier-III city airports would work well for the sector. These assets will fetch best value for AAI given the appetite shown by private players. At the same time, the role of AAI in developing airports at unserved and under-served locations will be crucial,” says Jagannarayan Padmanabhan, director, CRISIL Infrastructure Advisory.

As for upgrade of infrastructure, investment in the upgrade of terminal buildings and airside development at AAI airports has gone up by around 20% y-o-y since 2014-15. In 2018-19, the airport authority had set aside Rs 4,100 crore for capex expenditure. Terminal building projects worth more than Rs 10,000 crore are underway, being expected to be complete by the end of 2021. The value of the ongoing projects for airside development is around Rs 1,500 crore. These include construction of a new technical block-cum-control tower at the Kolkata airport and a parallel taxi track in Goa to increase efficiency and airside capacity. According to the AAI’s investment plan for the FY20-24 period, a total of Rs 25,000 crore would be spent on expansion of existing airports, revival of non-operational airports, and upgrade of air navigation systems and telecommunication infrastructure

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