Recent Developments: Major turnaround in activity

Major turnaround in activity

During the past year, the Indian aviation sector witnessed both peaks and troughs. The country’s airports saw a rapid increase in passenger traffic, which grew by about 12 per cent during 2018-19. Noteworthy developments took place in some big-ticket airport projects such as the Jewar and Navi Mumbai projects that have been in limbo for some time now. Several smaller airports marked their presence on the aviation map thanks to the Regional Connectivity Scheme (RCS). Privatisation of airports emerged as a key area of focus for the government. On the policy front, the industry is yet to come to terms with the changes in the airport development models and tariff structures. With respect to the airline industry, it has been a turbulent time. Airline operations have been hit by a number of factors ranging from the grounding of Jet Airways to the unending efforts of finding a suitor for Air India. That said, changing market dynamics have boded well for a few airlines such as IndiGo, GoAir and Vistara that now enjoy a bigger share of the pie.

Indian Infrastructure takes a look at some of the recent developments in the sector…

Government initiatives

  • Under Union Budget 2019-20, funds to the tune of Rs 45 billion have been allocated to the Ministry of Civil Aviation (MoCA). This marks a deep plunge of 53 per cent from the revised budget allocation of Rs 97 billion for 2018-19. Of the total allocation, Rs 4.8 billion has been earmarked for the provision of viability gap funding under the RCS.
  • With regard to RCS, only 194 routes of the total 705 routes awarded under its first, second and third rounds have been operationalised till date. In January 2019, 235 routes under UDAN round 3 were awarded which also brought in the provision of connecting six water aerodromes, first such initiative in the country.
  • Further, on July 1, 2019 first international flight from Guwahati to Dhaka was flagged off under the UDAN international.
  • On the policy front, on August 2, 2019, Parliament passed the Airports Economic Regulatory Authority [AERA] Amendment Bill, 2019, which will enable the government to bid out private airport projects on the basis of predetermined tariffs. Further, the threshold for an airport to be classified as a major airport has been raised from the current passenger handling capacity of 1.5 million passengers per annum (mppa) to 3.5 mppa, to reduce the ambit of AERA’s authority.
  • Earlier, in January 2019, the National Air Cargo Policy Outline, 2019, was released. The first such policy, it envisages making Indian air cargo and logistics the most efficient, seamless and cost and time effective globally by the end of the next decade.

Boost to airport infrastructure

  •  The government’s inclination towards ramping up airport infrastructure was evident in the operationalisation of several new airports during the past year. On January 9, 2019, the Andhra Pradesh government inaugurated the Orvakal greenfield airport located in Kurnool district. The airport was developed at an investment of Rs 1 billion by Andhra Pradesh Airports Development Corporation Limited.
  • On December 9, 2018, the central government inaugurated the Kannur international airport, Kerala’s fourth airport, developed at a cost of Rs 22.92 billion.
  •  In September 2018, two airports – Jharsguda airport in Odisha and Pakyong airport in Sikkim – were inaugurated. Both the airports were developed by the Airports Authority of India (AAI) as part of the RCS.
  • Besides this, foundation stones for the Bhogapuram greenfield international airport (Vizianagaram) and the long-delayed Jewar greenfield international airport in Greater Noida were laid on February 14, 2019 and March 9, 2019 respectively. The Bhogapuram and Jewar airport projects will be developed on a public-private partnership (PPP) basis and will involve an investment of Rs 42.09 billion and Rs 157.54 billion respectively.
  • Global bids for the selection of a concessionaire for Jewar airport were also invited by Noida International Airport Limited on May 30, 2019. Bids from eligible firms are due by October 30, 2019. In February 2019, GMR Airports Limited had emerged as the highest bidder for the execution of the Bhogapuram airport project.
  •  In April 2019, GMR Airports Limited also received the letter of award for the development, operation and management of the MIHAN – Multimodal International Cargo Hub and Airport at Nagpur – on a PPP basis.
  • In February 2019, the City and Industrial Development Corporation selected Larsen & Toubro as the engineering, procurement and construction contractor for the development of the Navi Mumbai international airport, which is worth over Rs 140 billion.

Privatisation of airports

  • Privatisation of airports has been one of the MoCA’s priority areas. In December 2018, the government put up six AAI-owned airports – Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangaluru – for privatisation.
  •  In January 2019, bids for leasing out the six aforementioned airports on a PPP basis were invited. Thereafter, in February 2019, Adani Enterprises Limited emerged as the highest bidder.
  • In July 2019, the cabinet approved the proposal for leasing out three of the airports, namely, Ahmedabad, Lucknow and Mangaluru, to Adani Enterprises Limited. Three other airports – Thiruvananthapuram, Guwahati and Jaipur – are currently awaiting approval.
  • Meanwhile, the government is reportedly working on a proposal to privatise 20-25 AAI-operated airports and is in the process of identifying airports handling 1-1.5 mppa of traffic.


  • In the past year, the Indian airline industry witnessed some major headwinds. The oldest private airline, Jet Airways, weighed down by a mountain of debt and falling revenues, suspended operations on April 17, 2019 after lenders refused to provide emergency funds. In an attempt to revive the airline, expressions of interest were invited in April 2019 with the last date of bid submission extended till August 10, 2019. Meanwhile, a consortium of 26 banks led by the State Bank of India approached the National Company Law Tribunal and filed an insolvency plea after the airline failed to attract bidder interest.
  • At the same time, the divestment process of Air India, which is also reeling under huge debt, has been dragging on without any clear turnaround plan. While attempts were made to sell a 76 per cent stake in the airline, the airline failed to receive any bidder interest and the bids closed in May 2019. To keep the airline afloat, the MoCA is making frantic efforts to raise funds through a mix of equity and external borrowings. Under Union Budget 2019-20, a meagre allocation of Rs 4.34 billion has been earmarked for the airline in addition to funds worth Rs 26 billion provisioned for Air India Asset Holding Limited, the special purpose vehicle set up to service part of the airline’s debt.
  • On a positive note, GoAir and Vistara are touching the skies as both airlines commenced international operations, on October 11, 2018 and August 6, 2019 respectively.