Aviation sector: Centre explores new model for development of airports

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The National Civil Aviation Policy, 2016, unveiled last month had mentioned the possibility of the AAI giving out operations and maintenance for a cluster of existing or new airports. Out of 125 airports of AAI, about 95 are operational of which 71 have scheduled commercial operations. Delhi and Mumbai airports, which are majority owned by private companies GMR and GVK, respectively, and in which AAI is an equity partner, are currently a major source of revenues for the state-owned entity. AAI owns 26 per cent stake each in Delhi International Airport Ltd and Mumbai International Airport Ltd.

The new development model being considered will ensure that the AAI remains the sole or majority owner of the airport to be modernised with most services being outsourced to private firms. The aviation ministry is planning to revive 50 non-operational airports of AAI in the next 3 years at an indicative cost of Rs 50-100 crore each. Sources said the new model may be tried at some of these 50 airports which are being revived.

The government expects this approach to boost AAI’s revenues as well. AAI expects its total revenue of Rs 9,545 crore in 2016-17 (Budget Estimates or BE) as against Rs 9,701 crore of revised estimates or RE in 2015-16, according to ministry sources. Its profit after tax is projected at Rs 1,128 crore BE 2016-17, sharply down from 1,746 crore RE in 2015-16, the sources added. The authority’s expenditure is set to rise to Rs 7,987 crore BE in 2016-17 from Rs 7,195 crore RE in 2015-16.

Union Minister for Civil Aviation Ashok Gajapathi Raju had said the both the Central and the state governments need to financially support development of these airports.

“Definitely with Delhi and Mumbai coming in, AAI have gained, if you see the revenue growth patterns, it has gained. And AAI have very few profit making airports, so it’s basically cross subsidy going on. But then for the air services in a big country, we need a helping hand kind of a thing. And this viability gap funding, everyone has to take a haircut – the Central government, the states,” Raju told The Indian Express in an interview last month.

The new policy has a provision of compensating AAI for any losses due to setting up of a new airport within 150 km radius of an existing one. The AAI will not be compensated in case the current capacity of the existing AAI airport has reached the saturation point in the year of commissioning of the new project. As an alternative to compensation, AAI may be given option at the discretion of the airport developer to either have the right of first refusal, or equity participation between 26 per cent to 49 per cent in the new airport.