The Adani Group forayed into the airport sector in 2019. It won the rights to modernise and operate six airports – Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati and Thiruvananthapuram – through a competitive bid announced in 2019. It will operate, manage and develop all these airports for 50 years in public-private partnership (PPP) mode. The Adani Group also has management control of Mumbai airport and is developing the Navi Mumbai international airport. At a recent conference, “Airports in India”, organised by Indian Infrastructure, R.K. Jain, chief executive officer, Adani Airports, discussed the group’s experience in the sector, its future plans and priorities, and the company’s outlook for the airport sector…
The experience so far
The airport sector is a business-to-customer-focused segment where attention is paid to better management of customer and stakeholder needs. The Adani Group’s journey in the airport sector began at a time when the country was struck by the pandemic. As a result, it faced various challenges in terms of exceptionally low traffic and revenues at the very outset. Adani has seven operative airports and an airport project under implementation. With the takeover of Mumbai airport and the development of the new Navi Mumbai airport project at hand, the company has certainly increased its expanse in terms of market size. The company has also observed growth given the recovery in domestic traffic during the post-Covid-19 period.
The Adani Group is working towards increasing the efficiency of all the airports under its ambit, by increasing their respective capacities (as it poses a challenge if the traffic at the airport is more than the capacity). Besides, the company is working on improving the existing infrastructure of the airports it manages in order to enable ease of operation. To this end, more X-ray machines have been installed at Ahmedabad airport, which was facing security issues. Meanwhile, it is also making efforts to decongest the Jaipur, Trivandrum, Guwahati and Lucknow airports.
It has been witnessed that as soon as privatisation of any airport infrastructure is undertaken, expectations in terms of operations, facilities, service levels, infrastructure and performance automatically increase. In the airport sector, it is very difficult to project the traffic especially amidst the pandemic (given that the traffic came to a grinding halt during the lockdown). Two years post the outbreak of the pandemic, domestic traffic is now almost back to normal and with the resumption of international flights, it is expected that traffic figures will increase further. The rising oil prices may cause cost escalations, but it is expected that this will get resolved in the near future. It is anticipated that in 2022-23, the airport sector will return to pre-Covid-19 levels in terms of domestic traffic. However, international traffic is expected to take some time to return to pre-Covid levels. Adani is expected to incur a total capital expenditure of Rs 140 billion in 2022-23 on the airports it operates, including the Navi Mumbai international airport. In the next round of bidding, the group company is expected to make more investments.
Development of Navi Mumbai international airport
Phase I of the Navi Mumbai international airport would have a capacity of 20 million passengers per annuum and is expected to be completed by 2024. The site work is under way. The project has faced multiple challenges in terms of cutting and flattening of hills, removal of debris, etc. Most of the work has been completed and the engineering, procurement and construction contract has already been awarded. Air ticket prices will initially be higher at Navi Mumbai airport as compared to Mumbai airport. Moreover, the initial ratio of traffic is expected to be 80 per cent domestic and 20 per cent international. The expected capex for the project is nearly Rs 197 billion, which includes the cost for site development.
Financial impact of Covid-19
Mumbai airport faced a huge liquidity crunch amidst the pandemic. As a countermeasure, the Adani Group focused on conservation of resources and curtailing expenditure. Salaries were also deferred for a few months. Adani underwent financial restructuring and refinancing. Further, the company had requested specific grants from the Airports Economic Regulatory Authority, but these were not sanctioned. However, with the resumption of domestic and international travel and conservation of resources, airport operations could sail through. Many concessions were offered to the airlines during the peak Covid-19 period so as to ease the finances and operations of these airlines. Despite the financial crunch, most of the airlines have been making timely payments.
In sum
The total traffic of the seven airports being managed and operated by the Adani Group is expected to reach 80 million passengers in financial year 2023 as against 40 million passengers during 2021-22. Meanwhile, international traffic is expected to be 10 per cent lower as compared to pre-Covid levels and domestic traffic is expected to be 5 per cent higher. At present, international traffic is 40-45 per cent of pre-Covid levels and domestic traffic has reached almost 70 per cent at Mumbai airport. Further, in all the airports being operated by Adani, cargo levels have reached around 90 per cent of the pre-Covid levels. It is expected that with the resumption of international flights, the traffic levels will increase.
Passenger experience and cleanliness at airports are Adani’s top priorities. In addition, the Adani Group is focusing on bringing in technological and digital advancements to increase operational efficiency and improve the performance of airports. Initiatives such as electronic gates, baggage drop facilities, equipping check-in counters with futuristic facilities have already been undertaken. Work on a common information platform for passengers is also under way. Meanwhile, work on facial recognition is expected to be undertaken. The main aim of digitalisation is to enable better customer experience and ease of travel. With the aim of increasing capacities, new terminals have either been planned (at Jaipur, Trivandrum and Ahmedabad airports) or are under construction (at Lucknow and Guwahati airports). Going forward, congestion at airports due to lack of capacity shall be overcome.
