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Even as government plans 200 new airports, AAI data says most existing ones are unprofitable

New Delhi,Shahkar Abidi(dna): Explaining the reason for the poor performance of Indian airports, Devesh Agarwal, an aviation blogger and analyst, said, “In India, most of the civil aviation related decisions and polices are taken on ad-hoc basis in absence of a comprehensive civil aviation policy.” He added that he had no doubt that more airports are needed, but that the government’s present plan of having 200-odd airports is imprudent.


A file photo of planes landing at the Mumbai International Airport.

Many aviation industry watchers are sceptical about the civil aviation ministry’s recently-announced plans to build 200-odd more airports across the country in the coming two decades. Aviation experts point to the fact that most of the existing airports are loss-making and thus are financially non-viable. They question the wisdom behind adding to this roster of non-performing airports.

While certain elements in the airline industry blame the government’s poor planning and execution for the plight of the existing airports, others are hopeful that the government will first try to turn around its loss-making airports before building new ones.

A cursory look at the latest balance sheet released by Airports Authority of India (AAI) reveals that most of the airports are in the red. For example, airports in the Western Indian region (except for Goa, Mumbai, and Pune) are loss-making ones. These include airports at Akola, Kandla, Aurangabad, Bhavnagar, Bhopal, Bhuj, Diu, Gondia, Indore, Jabalpur, Jamnagar, Keshod, Kolhapur, Porbandar, Rajkot, Songarh, Soplapur, Surat, Vadodara, Ahmedabad, and Juhu.

Commenting on the issue, Amber Dubey, partner and India head of aerospace and defense at global consultancy KPMG, said, “It’s difficult to predict the (optimum) number of new airports since the projected increase in traffic may be concentrated around the top 12-15 old airports – and they may go for airport capacity expansion. New airports will require significant government funding for survival. A rough estimate would be around 20-30 new greenfield airports by 2025.”

When asked to comment on whether it is prudent for the government to concentrate on the existing airports before coming up with new ones, Dubey said, “We need new airports in places of economic, tourist and strategic interest. These could be places close to mines, ports, special economic zones, industrial clusters or the country’s borders etc. They need to be chosen carefully since they may be non-viable for several years, before their hinterland economy grows and traffic picks up. These airports should be no-frills or low-frills airports in the public-private partnership mode. Their revenue shortfall should be compensated for, by way of the Essential Air Services Fund (EASF). The fund should be created through a 1-2% cess on all air tickets sold in India.”

Explaining the reason for the poor performance of Indian airports, Devesh Agarwal, an aviation blogger and analyst, said, “In India, most of the civil aviation related decisions and polices are taken on ad-hoc basis in absence of a comprehensive civil aviation policy.” He added that he had no doubt that more airports are needed, but that the government’s present plan of having 200-odd airports is imprudent.

Agarwal further blamed the wrong policies adopted by the government for poor financial health of airports in India. He was referring to the policy in which the central government is the major funder of an airport project, with the state or city concerned having negligible or no investment in the project. “In the US, the reverse is true, because of which the local citizens of the city have a stake in deciding the fate of the proposed airport,” he added.

The Narendra Modi government is bullish on the expansion of the civil aviation sector in India. Minister of civil aviation, P. Ashok Gajapathi Raju, during a recent meeting with chief ministers of various states and officials from the civil aviation ministry, said that the civil aviation sector in India has been growing steadily by 13.8% during the last 10 years. Raju said, “Though the rate of growth came down during the last two years due to the overall economic slowdown, it is recovering fast, with the year 2013-14 showing a growth of 6%.”

India is the ninth largest aviation market, handling 121 million domestic and 41 million international passengers with more than 85 international airlines operating to India, and 5 Indian carriers connecting over 40 countries. The sector is poised to handle 336 million domestic and 85 million international passengers by 2020, making India the third largest aviation market. The commercial fleet size is expected to grow from 400 today to 1,000 aircraft by 2020.

More airlines expected to join the fray
While the bulging middle class in the country is pushing the growth of aviation, most of the airlines are under severe financial debt. Nonetheless, at least half a dozen more airline companies are expected to join the competition this year.

Airports become shoppers’ paradise
In order to modernise and give a better experience to travellers, many airports, especially those under public private partnership- like the ones in Mumbai, Delhi, Bengaluru and Hyderabad- are becoming a shopper’s paradise. Shopping outlets also help the airports in generating lot of non-aeronautical revenues which promotes the health of the bottomline. Such airports have duty-free shops which offer the best of brands at cheap rates to passengers, because of which the passengers look forward to purchasing goods while travelling from the airport.

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