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Fri, Jan 04, 2019

Study: Aviation Growth In India Will Drive Need For More Airports

Government Has Approved Construction Of 18 Additional Airports As Passenger Growth Continues

The aviation market in India is experiencing the fastest expansion in the world. According to the International Air Transport Association (IATA), India will reach 487 million passengers (based on trips) by 2036. While that is an enviable position, there is a major roadblock in this unprecedented growth of the industry - the country's airports are currently straining to meet the rising demand. As the growth has continued, the Indian airport infrastructure has been placed under increasing pressure, and a steadfast build-up in airport capacity is what the country needs urgently, according to analysts.

The airports at four metro cities in the country - New Delhi, Mumbai, Hyderabad and Bengaluru - cater to nearly 55% of the country's total air traffic and are operating at near-full capacity. India's top ten airports handled 232 million passengers in 2018 in comparison to just 124 million in 2013. This rapid growth in domestic aviation in the country over the last several years brings forth the need for more airports in the country. To handle the steep rise of the passenger influx, a $4.3 billion financial investment would be required to expand their capacity by 2021.

The current airport capacity in India is up to a maximum of 317 million passengers and the year's traffic is expected to be around 300 million. The statistics revealed by the Center for Aviation's (CAPA) cautions that by 2022, India could exceed its maximum structural capacity. In fact, it could happen even earlier if we witness a faster growth rate of more than 10%. According to CAPA, to create an additional capacity of around 500-600 million passengers, India will need around 55 more airports by 2030 which will require an investment of around $36 billion to $45 billion. The government is quite aware of this situation and in line with the growth trajectory and the rising needs, the consent for the construction of 18 airports has already been given by the Government in order to reduce the load on the major airports and provide connectivity to the smaller towns.

India recently achieved a milestone with its 100th airport becoming operational in Sikkim. One of the 18 approved airport projects; Pakyong Airport in Sikkim has been built in inhospitable terrain, at a height of 4,500 feet, at an estimated cost of $50 million.

Another upcoming airport is the Mopa Airport in Goa, which is being developed by GMR after winning the bid at $443 million on a public-private partnership basis with the state government. In addition to this, the passenger facilities such as the terminal building at the existing Dabolim Airport will also be improved as AAI plans to invest $57 million in this regard. The Navi Mumbai International Airport is another major airport aimed at easing air traffic congestion at Chhatrapati Shivaji Airport that is being developed by the GVK with an investment of $2.3 billion. The other under-construction airports include Karaikal in Puducherry, Bijapur, Gulbarga, Hasan and Shimoga in Karnataka, Kannur in Kerala, Dholera in Gujarat, Sindhudurg in Maharashtra and Bhogapuram in Andhra Pradesh.

Furthermore, in the next 15 years, the Government plans to establish around 100 more airports at an estimated cost of $57 billion, as was highlighted by the Minister of State for Civil Aviation, Jayant Sinha, recently. Among the suggested 100 airports, 30 airports will be secondary airports or an expansion of the existing ones while the remaining 70 airports will be at new locations.

The government is focusing on taking 15-20 years view on airport infrastructure development. In the budget for FY 2019, the government announced a NextGen Airports for Bharat (NABH) Nirman scheme to expand airport capacities to more than five times. Under this scheme, the investments are to be made by both the private sector and the state-owned Airports Authority of India (AAI) for the airport upgradation, in the due course of time.

However, the question remains how will India finance the required expansion?

The Civil Aviation Minister, Jayant Sinha had said in an interview that the bulk of the investment would come from the private sector.

"The government's plan to build 100 more airports is an ambitious target as when you look at the track record of execution, historically it has been very difficult to develop infrastructure on a scale and at a pace that has been envisioned here," said Neeladrinath Sarangi, Senior Manager at CAPA India. "Starting from capital investment, land acquisition, getting approvals, all of that will take time."

Moreover, "The experience of private airport developers is somewhat mixed. They have developed very good airport infrastructure, but not all of them have made significant returns. So in terms of the financing side, getting private interest will not be very easy," he added.

Also, the IATA's Chief,  cautioned the Indian government, "Airports need to be developed first and foremost as a catalyst for economic development. That means putting the needs of the aviation front and center," said IATA chief Alexandre de Juniac. He asserted that the Indian government must play a leading role in infrastructure development and focus on airports as important long-term drivers of India's prosperity.

Airports play a vital role in the economic development of the country and as Indian airports continue to rank among the world's best, there is a need for more world-class airports to meet the growing demand for air travel. India definitely has the capacity to develop effective infrastructure; it needs to develop and implement a comprehensive airport plan to support the growth in order to eliminate the bottlenecks in the path of fulfilling the needs of travellers and the economy. While private sector investment can provide short-term solutions, national interest may be best defended when the government owns the assets and manages it as critical economic enablers.

(Source: Frankfinn Aviation Services news release)

FMI: www.frankfinn.com

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