India accelerates privatisation of more public airports to meet soaring air travel demand
MUMBAI: India is forging ahead with the privatisation of more public airports, as the country anticipates a surge in demand for air travel.
The move is expected to bring more infrastructure upgrades, reduce congestion and boost government revenue, said observers.
India has already emerged as the world's third-largest aviation market, propelled by major investments in airport facilities and the rise of airlines with expansive flight networks.
DEMAND FOR MODERN, EFFICIENT AIRPORTS
Analysts said Indian Prime Minister Narendra Modi's government hopes to monetise loss-making assets by packaging them with profitable ones to attract private investors.
For instance, Bhubaneswar International Airport, situated in the eastern Indian state of Odisha, is one of 11 airports that India wants to privatise in less than a year.
Maulesh Desai, director of credit rating agency CareEdge Ratings said: 'Private players can bring operational efficiency (to) the airports and good technologies, (which) can reduce the turnaround time and provide a better passenger experience as well as airline experience.'
The push comes as India's aviation sector gains momentum in its post-pandemic recovery, fuelling the demand for more modern and efficient airports.
CareEdge has projected a compound annual growth rate of 9 per cent in passenger traffic over the next two years, with numbers expected to reach about 485 million by 2027 as international travel expands at a faster pace.
Investment in the sector is also projected to grow, with an estimated US$12 billion in capital expenditure expected over the next five years, according to ratings agency ICRA.
Airport privatisation in India began over two decades ago under a previous administration, aimed at bringing in investment and saving public funds for other uses.
The country's busiest airports — Delhi and Mumbai — were among the first to go private in 2006.
Six other Indian airports were privatised in 2019.
These were done under a public-private partnership model, with the Airports Authority of India owning a 26 per cent stake and private firms holding the majority 74 per cent.
HIGHER OPERATING EXPENSES
Now, the government plans to sell off its stake in some of these ventures while also expanding the privatisation initiative to more airports.
'I think this strategy of airport privatisation and now bringing in more airports for the private-public partnership model is based out of the government's initiative to totally develop India,' said Milanka Chaudhury, partner at law firm Trilegal.
Other airports in cities such as Amritsar, Varanasi, Raipur, and Trichy are also expected to go private by March next year.
Industry giants like the Adani Group and GMR Airports, which already operate several privatised airports, are expected to be among the bidders.
Observers said the big draw for private investors is the promise of potential profits that come not just from the aviation industry, but other sectors that contribute to a world-class airport experience such as retail and food and beverages.
'There will be these non-aeronautical businesses like duty-free kiosks, there will be restaurants, and it's more like a shopping experience within the airport,' said Trilegal's Chaudhury.
'It also has a lot of commercial aspects to it. So the passengers spend a lot of time and money there, and the government gets a revenue share of that.'
But this transformation could come at a cost.
Higher operating expenses could eventually be passed on to both airlines and passengers, particularly as demand grows, incomes rise, and environmental concerns around aviation intensify.
CareEdge Ratings' Desai said: 'That leads to the higher burden on the airlines as well as the passengers, so that is one challenge we need to (observe).'
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