Year Ender 2021: Amid mid-term concerns, cheer seen returning to airports business

A strong recovery in domestic traffic and continued improvement in international traffic due to the expansion of bubble flight operations led to footfalls markedly improving across airports in the country.

According to data from the Airports Authority of India (AAI), all operational airports handled 1.89 lakh commercial flight movements, 2.32 crore passengers and 2.58 crore tonnes of freight during November 2021. In the same period last year, the numbers had stood at 1.28 lakh, 1.35 crore 2.43 crore tonnes, respectively.

“The past year has indeed been a game-changer for the aviation industry. Owing to ease in travel norms, we saw an exponential rise in air traffic since June 2021 around the globe along with a rise in passenger confidence in air travel,” Prakash Tulsiani, CEO of the country’s second-busiest airport -- Chhatrapati Shivaji Maharaj International Airport (CSMIA) in Mumbai, told Businesstoday.In.

“AAI’s data indicates doubling of passenger traffic from Apr-Nov 2021 over the same period last year. The air freight business has done even better and that is good news for the industry because it is a reflection of the significant potential for manufacturing, trade and tourism, and the role that India can play as a key air cargo hub in the global logistics business,” said S Vasudevan, partner and global airports lead, aerospace & defence at KPMG.

Already several airports like Bengaluru, Hyderabad, Chennai, Goa and the upcoming one at Greater Noida are investing big in cargo infrastructure to capitalise on this opportunity.

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Important policy interventions and market developments like new tax reliefs and changes to land lease policy for the maintenance, repair and overhaul (MRO) business, expansion as well as the development of new infrastructure in Bengaluru and Greater Noida and AAI’s intent to redevelop 13 more airports under public-private partnership (PPP) concessions are expected to provide a further boost to the business.

Moreover, the central government has designated 25 airports for asset monetisation under the National Monetisation Pipeline (NMP) from financial year 2022-25.

Adani arm’s strong foray

The year was particularly noteworthy for the Adani Group. Its wholly-owned subsidiary, Adani Airport Holdings Ltd (AAHL), took over airports in Ahmedabad, Lucknow, Jaipur, Mangaluru, Guwahati and Thiruvananthapuram after making a one-time payment of Rs 2,440 crore to AAI. The group had won the bids to operate, manage and develop the six airports in 2019 for a period of 50 years.

In July, AAHL also took over the management control over the Chhatrapati Shivaji Maharaj International Aiport from the GVK Group. The acquisition has made AAHL the country’s largest airport infrastructure company with 25 per cent of airport footfalls and 33 per cent of the cargo traffic pan-India.

“CSMIA witnessed a record passenger traffic of around 1,09,000 in a single day for the first time since the pandemic broke out. The airport also witnessed non-metro cities achieving pre-Covid numbers on a faster rate as compared to the metro cities, thus indicating a rise in air travel from and to tier-II and tier-III markets,” informed CSMIA’s Tulsiani.

Technology to play a bigger role

Experts felt that technology would come to play an even bigger role in airport services in the coming year. The country’s three busiest airports in New Delhi, Mumbai and Bengaluru have leveraged the latest solutions to ensure social distancing and rapid testing of new arrivals.

“One of the things that the pandemic has amplified in the last 18 months is the role of technology. It has markedly changed the nature and quality of airport services and will continue to redefine infrastructure investments and customer services in 2022,” averred KPMG’s Vasudevan.

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Going forward, he sees Indian airport operators, airlines and ground handlers investing in renewable energy projects, electric equipment such as TaxiBots, ground power units (GPUs), auxiliary power units (APUs) and buses, and carbon-efficient buildings.

According to analysts spoken to for the story, the outlook for the airport segment would, however, continue to remain stressed in the medium term.

“The overall sector outlook for airports continues to remain somewhat weak over the medium term with continued operating losses for the fiscal driven by unabsorbed fixed costs and lower non-aero revenues,” observed senior director Care Ratings, Amod Khanorkar.

But they remain optimistic about the airport segment’s long-term prospects.

“India has always been the cynosure of the global aviation industry, being one of the fastest-growing markets for over a decade. The fact that even today 95 per cent of the population doesn’t have access to flying in a high-growth economy makes India one of the most attractive markets in the world,” said Vasudevan.