The entire aviation industry is struggling with liquidity challenges and stressed balance sheets. Airlines that intended to expand operations have put their plans on hold. The Airports Authority of India (AAI) has recently added capacity at many airports as a part of its expansion plans. The extra capacity was accomplished by the construction of new terminals, apron work and other works. In the past five yea-rs, a total capacity of 158 mppa has been added, with AAI airports adding 85 mppa. The AAI has operationalised more than 17 greenfield airports and has spent Rs 85.56 billion on development and associated works at various airports across the country in the past three years. The authority is also focusing on restoring and operationalising the existing airports.
Indian Infrastructure takes a look at the AAI’s key plans and initiatives…
Over Rs 1 trillion is planned to be spent on airport infrastructure in the next five years, of which the AAI targets to spend Rs 250 billion for development, modernisation and upgradation of its airports in the country during this period. This will include all major airports such as Guwahati, Leh, Patna, Trichy, Vijayawada, Jabalpur, Chennai, Srinagar, Pune, Lucknow, Agra, Jaipur, etc. After the completion of all the works, the combined capacity of the airports is likely to be increased by 100 mppa. In 2021-22 the AAI would spend more than Rs 60 billion on runway expansion/strengthening, new terminal buildings, etc. New terminal buildings are being built at 15 airports, of which construction work is ongoing at 12 airports. In addition, expansion of the existing terminals is underway at nine airports. AAI’s key focus areas are the development of cargo terminals and provision of maintenance, repair and overhaul (MRO) services. It plans to achieve a cargo handling capacity of about 10 million tonnes by 2026-27. The AAI is in the final stages of operationalising an integrated cargo management system, which will eventually be linked with the National Logistics Portal. In addition, a paperless cargo clearance system would be implemented at Chennai and Kolkata airports. Recently, the AAI launched a new international air cargo terminal at the Devi Ahilya Bai Holkar Airport in Indore at a cost of Rs 22.6 million.
The AAI plans to develop at least 100 airports, waterdromes and heliports by 2024 under the regional air connectivity scheme (RCS) – Ude Desh ka Aam Nagrik (UDAN). As a part of this scheme, nine airports have been developed in the year 2019-20. During the fiscal year 2020-21, 26 airports were to be built (of which 14 airports have been developed till the third quarter). Further, 20 airports each are to be developed in the financial years 2021-22 and 2022-23 and 25 airports to be developed in the financial year 2023-24. As of August 2021, of the 780 routes awarded under the UDAN scheme, only 359 routes have been operationalised so far, which is less than 50 per cent of what was awarded. The AAI seeks to have 1,000 routes operational by 2024. In March 2021, the government inaugurated 22 new routes under the RCS, six of which are in the Northeast India. These include Shillong-Agartala, Shillong-Silchar, Dibrugarh-Dimapur, Gorakhpur-Lucknow, Kurnool-Bengaluru, Visakhapatnam-Chennai, Agra-Bengaluru-Bhopal and Prayagraj-Bhubaneswar-Bhopal. Further, several state governments have been requested to identify suitable land for the construction of the second airport in the state.
The recently launched National Monetisation Pipeline has set out an asset monetisation plan of Rs 200 billion for the civil aviation sector. This includes privatisation of 13 airports and AAI’s stake in Delhi, Mumbai, Bengaluru and Hyderabad airports in 2021-22. The union budget 2021-22 proposed the monetisation of the next batch of airports in Tier-2 and Tier-3 cities, with airports being monetised for operations and management concessions. In 2018, the AAI invited bids for six airports under the public-private partnership scheme. The six airports are Guwahati, Thiruvananthapuram, Lucknow, Mangaluru, Ahmedabad and Jaipur. Adani Enterprises Limited won the bid for all six airports. The ownership transfer was delayed initially due to the Lok Sabha 2019 elections and thereafter, due to the Covid-19 outbreak. The revenue received by AAI through the public-private partrnership model has aided in the development of infrastructure facilities in Tier-2 and Tier-3 cities, as well as the construction and upgradation of regional airports under the UDAN scheme.
The bid process is yet to be initiated for six new airports under the next round of airport privatisation. The six airports in the second round are likely to be those in Amritsar, Varanasi, Bhubaneshwar, Indore, Raipur and Tiruchirappalli – currently owned and operated by the AAI. The second round of privatising six airports was put on hold as different arms of the government are debating whether to cap the number of airports that an entity can bid for. This is being planned so as to avoid one entity getting control of many airport assets, as seen in the case of the previous bidding round. Further, 6-10 airports have been identified for the third round of airport privatisation, which is on the AAI’s agenda next. In all, the government plans to privatise 30-35 airports over the next five years. With the majority of large airports already privatised/in the process of privatisation, there would only be Tier-2 and Tier-3 airports (brownfield) left for privatisation in the long term.
Other key initiatives
AAI is creating greener structures, thereby attempting to minimise building resource consumption, waste generation and the overall ecological impact based on accepted energy and environmental principles. In November 2020, the AAI and NTPC Vidyut Vyapar Nigam Limited, (NVVN), a subsidiary of NTPC Limited, signed an MoU for setting up of solar power plants and adoption of e-vehicles at AAI airports. In the initial phase, NVVN will be taking up projects at airports in Tamil Nadu and Rajasthan. The airport authority has identified the land parcels of airports for city side development, which includes 145 acres near Kolkata airport, 45 acres near Amritsar airport, Bhubaneswar airport, 35 acres near Jaipur airport, 60 acres near Varanasi airport, 217 acres near Lucknow airport, 80 acres near Raipur airport and 117 acres near Tirupati airport. The land is likely to be leased to any company for a period of 25-30 years for a fixed annual rental income. the In September 2020, In-Line Baggage Screening System with computed tomography scanners was commissioned at the Srinagar International Airport with a cost of Rs. 126.7 million. The system is integrated with the airport baggage handling system to provide a complete hold baggage processing and screening system.
The Covid-19 induced slowdown in the economy has resulted in various setbacks, with the most challenging factor being capex for airside, terminal and surface links expansion and overall construction works across the airports. Due to the stoppage of flight activities, AAI’s revenue resources have been drained. AAI borrowed Rs 15 billion from the State Bank of India to meet its working capital requirements due to a severe decline in earnings. This is the first time that AAI has obtained credit to fund its working capital needs. The authority is also looking at alternative sources of funding to carry out the infrastructure works. It is now concentrating on short gestation projects instead of long gestation ones. Meanwhile, the operational airports seem to have deferred their expansion plans in view of the collapse in traffic and thus, revenues. The greenfield airport construction across India has slowed or halted and additional capacity requirements may be deferred by a few years. The path forward necessitates optimising and expanding existing passenger handling capacity, increasing the focus on digitalisation and automation, and mitigation of risks.