The aviation sector, needless to say, is going through the worst turmoil ever. The Covid-19 pandemic has put the sector’s very viability in question. Airlines are incurring huge losses, airports are seeing erosion of non-aeronautical revenues, consumer confidence in air travel is low, construction of new airports and terminal expansions are witnessing delays, and international flight operations are restricted to air bubbles formed with select countries. Despite the huge potential, the aviation sector will take time to recover from the Covid-19 shock.
Traffic at airports has seen a sharp drop after the nationwide lockdown in end March 2020. During April-September 2020, passenger traffic at airports declined by 86 per cent to around 24 million over the corresponding period of 2019-20. While domestic flight services resumed from May 25, 2020, scheduled international travel is still not allowed. This was reflected in a steeper fall in international passenger traffic by 93 per cent during the first half of 2020-21. Air freight traffic is also down despite easing of restrictions by the government. There was a 45 per cent plunge in overall freight traffic in the April-September period of 2020-21.
Progress under greenfield airports
The Covid-19 pandemic-induced lockdown impacted construction activity due to a shortage of labour, slow pace of work on account of physical distancing, and days lost due to the lockdown. There are also issues pertaining to procurement of material and equipment for construction work. Projects are expected to be delayed by three to six months. Upcoming airport projects in Mopa and Navi Mumbai are among those witnessing delays. However, some progress is now being seen as the economy is gradually opening up. The upcoming Jewar airport recently achieved financial closure and the concession agreement has been signed. Besides, the concession agreement has also been signed for Bhogapuram airport. The other key upcoming airports include the Hirasar, Kushinagar and Sriperumbudur airports.
Rising investor interest
Lenders have always been quite vocal about their optimism regarding funding airport projects. They have regarded the airport sector as the safest to lend to among infrastructure sectors. While GMR and GVK have dominated the private sector share in the sector for a long time, several other players, both domestic and global have been showing increasing interest. The first round of bidding for the privatisation of six airports (Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram and Guwahati) saw participation from the Adani Group, PNC Infratech, Autostrade Indian Infrastructure Development, AMP Capital (GIF II Lux Holdco) 5LP and I-Investment Limited. The bidding for Jewar airport was also quite competitive. Besides, Group ADP entered the Indian airport sector by buying a 49 per cent share in GMR Airports in February 2020. Recently, the GVK Group agreed to cede control of the Mumbai and Navi Mumbai airports succumbing to pressure from lenders and Covid-19 pandemic battering its business. The Adani Group acquired a 74 per cent stake in Mumbai International Airport Limited from GVK. With this, along with the six privatised airports in its kitty, the Adani Group has become the largest airport operator in the country.
Technology initiatives
The Covid-19 outbreak has brought about the concept of physical distancing. For most of the airports, technology has come to the rescue. Contactless plane boarding procedures are already being followed at the majority of the airports in the country. Hyderabad airport has introduced a new service, contactless parking using FASTag, which is India’s first car parking service to offer 100 per cent contactless service. In the battle against Covid-19, airports have prepared standard operating procedures for staff and passengers to follow. Airports have had a digital makeover to minimise human contact. The Delhi, Bengaluru and Hyderabad airports have introduced a biometric boarding system and the country’s first artificial intelligence-enabled temperature screening airport gate is coming up at Kannur airport.
Outlook
While the aviation industry has been severely hit by Covid-19 and is expected to take at least two years to recover, foreign investors are bullish on the long-term growth of the sector. The sector offers lucrative merger and acquisition opportunities at both the holdco and asset levels. By 2024, the Airports Authority of India (AAI) is planning to develop at least 100 airports, waterdromes and heliports across the country under the Regional Connectivity Scheme. Most of the airports’ passenger potential will saturate in the next 15 years and India will have to practically double the airport count from 137 to 250. Airports in locations like Delhi and Mumbai will also saturate by 2040 and a third airport will be needed. Overall, the expected growth needs to be supported by augmentation of both airside and city-side capacity.