Taking Flight: AAI’s plans for major infrastructure development

AAI’s plans for major infrastructure development

The Airports Authority of India (AAI) recently added capacity at several of its airports as a part of their expansion plans, by way of constructing new terminals, apron work and other work. In the last five years, a total capacity of 158 mppa has been added, with AAI airports adding 85 mppa. AAI has operationalised more than 17 greenfield airports and has spent Rs 85.56 billion on development and associated work at various airports across the country in the last three years.

Indian Infrastructure takes a look at the AAI‘s key plans and priorities…

Over Rs 1 trillion is planned to be spent on airport infrastructure in the next five years, of which AAI aims to spend Rs 250 billion for development, modernisation and upgradation of AAI airports in the country. These will in­clude all major airports such as the Guwahati, Leh, Patna, Trichy, Vijayawada, Jabalpur, Che­n­­nai, Srinagar, Pune, Lucknow, Agra and Jai­pur airports. Upon completion of all the work, the combined capacity of the airports is likely to be increased by 100 mppa. In 2021-22, AAI will 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. In addition, ex­pa­nsion of existing terminals is under way at nine airpo­rts. AAI’s key focus areas are the de­v­e­lopment of cargo terminals and provision of mai­n­tenance, repair and overhaul services. It plans to achieve a cargo handling capacity of about 10 million tonnes by 2026-27. AAI is in the final stages of operationalising an integrated ca­rgo management system that will eventually be linked with the National Logis­ti­cs Portal. In ad­dition, a paperless cargo clearance system will be implemented at Chennai and Kolkata airports.

AAI plans to develop at least 100 airports, waterdromes and heliports by 2024 under the Regional Connectivity Scheme (RCS) – Ude Desh ka Aam Nagrik (UDAN). During fiscal year 2020-21, 26 airports were to be built, out of which 14 have been developed as of the third quarter. Further, 20 airports each are to be developed in financial years 2021-22 and 2022-23, and 25 airports are to be developed in financial year 2023-24. As of August 2021, out of the 780 routes awarded under the UDAN scheme, only 359 routes have been operationalised – less than 50 per cent. 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 northeast India. Further, several state governments have also been requested to identify suitable land for the construction of the second airport in their states.

The recently launched National Moneti­sation Pipeline has set out an asset monetisation plan of Rs 200 billion for civil aviation sector. As of September 2021, the AAI’s board has approved the privatisation of 13 large airports and seven smaller ones. Jharsuguda airport will be bundled with Bhubaneswar, and the Kushi­nagar and Gaya airports will be clubbed with Varanasi airport. The Kangra, Amritsar airport, Jalgaon and Trichy airports will be clubbed with the Raipur, Jabalpur, Indore and Tirupati airports, respectively. The smaller airports will be offered jointly with the six larger airports, making them more appealing to investors. AAI plans to hire a consultant to help it draft the bid document and decide the concession period and reserve price. Bids will be invited at the beginning of 2022.

In pursuance of the government’s decision to divest its stake in joint venture airports in Delhi, Mumbai, Hyderabad and Bengaluru, AAI will soon commence the monetisation procedure. AAI has a 26 per cent stake each in the Delhi and Mumbai airports, and a 13 per cent stake each in the Hyderabad and Bengaluru airports. According to reports, the Ministry of Civil Aviation has already moved a cabinet note to approve the sale of AAI’s stake. Bengaluru and Hyderabad will lead the divestment process, followed by Mumbai and Delhi.

Next steps

The Covid-19-induced slowdown in the economy has resulted in various setbacks, with the most challenging factor being capex for overall construction work across airports. AAI borrowed Rs 15 billion from the State Bank of India to meet its working capital requirements due to a severe decline in earnings. The authority is also looking at alternative sources of funding to carry out the infrastructure work. It is now concentrating on projects with short gestation periods. The path forward necessitates optimising and expanding existing passenger handling capacity, increasing focus on digitalisation and automation, and mitigating risks.