Non-aero revenue: Airports Authority looks to ‘cash in’ on its spare city land

The AAI will monetise its land by leasing it out to private companies, giving it on a revenue share basis and through a combination of leasing and revenue sharing.

Written by Sunny Verma | New Delhi | Published:September 21, 2016 3:32 am
The AAI is also working on developing 50 no-frills airports, for which it is deliberating upon the designs of airports to minimise costs. The AAI is also working on developing 50 no-frills airports, for which it is deliberating upon the designs of airports to minimise costs.

Following a directive from the Prime Minister’s Office, the state-owned Airports Authority of India (AAI) is planning to monetise the city-side portion of its total land bank of around 55,000 hectares across the country. This is expected to significantly boost the non-aero revenue of the AAI as it would lease the city side land for purposes such as hotels, warehouses and cold storage.

“We have around 55,000 hectares of land across the country. Not all of this can be monetised, but we are looking at monetising the city side land, which comprises about 30-35 per cent of the total land bank,” AAI chairman Guruprasad Mohapatra said on Tuesday. The AAI has already initiated the process of monetising city side land at Bhubaneswar airport.

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Mohapatra said the AAI has got the mandate from the PMO and Niti Aayog for monetising spare land. The AAI earned revenues of Rs 10,824 crore in 2015-16, and profit before tax of Rs 3,697 crore.

The AAI will monetise its land by leasing it out to private companies, giving it on a revenue share basis and through a combination of leasing and revenue sharing. It doesn’t plan to have any management control in the entity that will be taking the land on lease or on revenue share basis.

Outsourcing operation

The AAI has started the process of outsourcing operations and maintenance (O and M) work at its Jaipur and Ahmedabad airports to private firms. This is a new model that the authority is experimenting with, and depending upon its success, the outsourcing model will be used for other airports as well. The AAI plans to invite bids from private companies for outsourcing work at these two airports by November-end.

“We have to go to the Ministry of Finance (for its permission for inviting bids) since these are PPP or public private partnership projects. By this month end, we plan to approach the ministry and by November we are aiming to invite bids,” Mohapatra said.

The National Civil Aviation Policy, 2016 had in June 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.

The AAI is also working on developing 50 no-frills airports, for which it is deliberating upon the designs of airports to minimise costs.

Main savings on such no frills airports will be on the terminal building, which composes major chunk of development expenses. These airports will initially encourage flying by 9-16 seater planes.

The AAI has lined up a capital expenditure plan of Rs 17,500 crore to be spent by 2019. Most of this will be funded through external accruals while the authority may go to the market to raise resources in the last year of its capex cycle.

Airlines operating from these airports will get concessions on landing, parking charges and other expenses. Their locations are being finalised after consultations with the airlines.

Regional connectivity

The AAI has also prepared a list of 20 underserved and unserved airports suitable for the regional connectivity scheme (RCS), which is expected to be notified soon. These airports include Bikaner, Jaisalmer, Warangal, Bhatinda, Pathankot, Jamnagar, Gwalior, Agra and Allahabad among others.

In these 20 airports the AAI is ready to offer RCS routes, but it will depend upon airlines’ willingness to start operations. The Centre has proposed to cap fares at Rs 2,500 for a one-hour flight under the RCS. It also plans a levy on all domestic and international flights on metro routes to support regional connectivity. The collections from the cess will be used to provide viability gap funding to airlines operating on the RCS routes.

The government will also exempt service tax on tickets on RCS routes, and remove excise duty on ATF drawn by airlines. After the RCS policy is notified the Centre, the AAI will invite bids from airlines willing to operate on these routes. The scheme will encourage “flying by masses” through safe, secure and affordable means, Mohapatra said.