AAI Plans for Major Infrastructure Upgrade

“AAI plans to raise its capex for capacity expansion from Rs 30 billion to Rs 50 billion per annum”

India’s aviation industry is rapidly growing on the back of rising demand for domestic and international air travel. The country needs more airports to keep pace with the surge in demand. At a recent India Infrastructure conference, Arvind Singh, Chairman, Airports Authority of India (AAI) shared the recent capacity expansion initiatives and set out a roadmap for the airport sector…

India is the fastest growing aviation market at present. As per IATA, India is expected to become the third largest aviation market in the world after US and China by 2024-25.India has benefitted from working-age population, rising per capita income, further liberalisation of the sector and downward pressure on fares due to increased competition.

Setting up of airport infrastructure, its maintenance and operations is very complex in nature due to the involvement of multiple stakeholders such as state governments, fire agencies, security agencies and the local population. Increasing passenger growth, coupled with capacity constraints at various airports, has necessitated timely allocation of the workforce/assets and quick decision-making. The AAI plays a major role in providing solutions to these problems so as to enhance customer experience and operational efficiency. Further, it is looking for alternative means to augment non-aeronautical revenues and introduce digital initiatives for ensuring a seamless travel experience.

Growth in the aviation sector

When urban and discerning travellers are looking for improved connectivity across India, smaller airports are playing a niche role in meeting the increased demand. This is evident  from the growth in passengers handled by airports in many Tier II and III cities. During 2018-19, cities such as Ranchi, Patna, Indore, Bhubaneswar, Varanasi, Surat and Vijayawada registered a growth of over 27 per cent in passenger traffic as against the country average of 12 per cent. These cities are expected to witness higher growth in the near future due to expanding airport infrastructure and rising airline penetration.

The government is providing stimulus to the civil aviation sector through various measures. The Regional Connectivity Scheme (RCS) is a step in this direction. It intends to cater to the unserved and underserved areas of the country. Private sector participation is being encouraged in the expansion and upgradation of existing infrastructure. In 2018, six airports were identified for taking up operations, management and development through the public-private partnership (PPP) mode. These are Guwahati, Lucknow, Jaipur, Ahmedabad, Mangaluru and Trivandrum. While letters of award have been issued for the Ahmedabad, Lucknow and Mangaluru airports, approval from the centre is awaited for the remaining three airports. Another six airports – Raipur, Trichy, Amritsar, Indore, Varanasi and Bhubaneswar – have been identified to be taken up for development under PPP. To this end, the process of appointment of a transaction adviser has been completed. Final approval from the union cabinet is awaited, after which bids will be invited.

Airport capacity enhancement initiatives

Since 2014, AAI has undertaken capacity enhancement at various airports. It has built 11 new terminal buildings, expanded and modified three terminal buildings at existing airports and developed three new airports at an overall investment of Rs 30 billion. The construction of a new terminal building at Chennai airport is also underway. Recently, on February 7, 2020, Bidar airport commenced operations, becoming the eleventh state/private airport in the country. A total capacity of 158 million passengers per annum (mppa) has been added in the past five years, of which AAI airports have added 85 mppa. The present capacity of all airports is 367 mppa, including 168 mppa capacity for AAI airports. As part of airside capacity enhancement, AAI has undertaken extension of runways at 10 airports, and upgradation/ strengthening/ resurfacing of runways at 11 airports at a total cost of Rs 12.66 billion. Besides, the authority has constructed 110 new aircraft parking bays since 2014.

Renewable energy initiatives

Airports are provided electricity at high commercial rates to cross-subsidise for the loss incurred on account of the poor financial health of discoms and supply of power to households and the agricultural sector at relatively lower rates. For instance, in states such as Maharashtra and West Bengal, the commercial electricity tariff ranges between Rs 7 per unit and Rs 12 per unit. Thus, AAI is tapping alternative energy sources such as solar power for meeting the energy requirements of airports at lower costs. So far, a total of 41.57 MWp of capacity has been generated through rooftop and ground-based solar plants across 47 airports, thereby leading to a saving of 7 per cent in energy costs.

New opportunities

AAI is setting up a world-class research organisation, the Civil Aviation Research Organisation (CARO), at Hyderabad at an investment of Rs 12 billion over the next decade. CARO will cater to air navigation services and airport/engineering research. Land has been acquired and construction work has started for the project.

A host of opportunities are emerging in the aviation sector, including those for setting up multilevel car parks, hotels, amusement zones, etc. AAI is developing these auxiliary services on the PPP model. Besides, it is implementing green technologies in airport management for environmental and economic benefits such as electric vehicles, LED lights, solar power plants, and rainwater harvesting.

Air cargo is an untapped area which presents huge opportunities. AAI has set up a subsidiary, AAI Cargo Logistics and Allied Services Company Limited, which handles almost 30 per cent of the country’s total air cargo. International cargo facilities have been recently established at Aurangabad/Trivandrum and a new domestic cargo terminal has been inaugurated at Surat. Further, AAI is looking to monetise land parcels available at various airports. To augment revenues through this route, monetisation of the available land has been allowed at privatised airports by developing city-side infrastructure.

In order to promote paperless air travel, AAI has introduced a biometric e-boarding system, DigiYatra. It provides an IT platform to bring all stakeholders on to a common platform for seamless and efficient movement of air travellers using a facial recognition technology. NEC Technologies has won the contract to provide facial recognition technology at four airports – Kolkata, Pune, Vijayawada and Varanasi – that have been taken up in the first phase. The rollout of DigiYatra is expected by September 2020. Besides, the implementation of DigiSky for drone registration, operation and management control in the Indian skies has started.

In sum

As the majority of the airports are bursting at the seams, AAI plans to raise its capex for airport capacity expansion from Rs 30 billion per annum to Rs 50 billion per annum to meet the burgeoning demand for air travel, particularly in Tier II and Tier III cities. While the bulk of this will be met through AAI’s own resources, its board has recently granted approval for raising funds overseas. Meanwhile, the authority is tapping the potential of the air cargo business with the development of special cargo handling zones such as pharmaceutical zones and cold cargo handling zones. The e-commerce boom will also aid the growth of the air cargo industry.

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