Robust Traffic – Going forward, traffic growth is expected to be lower than the levels seen in the past decade because of the base effect, but is still expected to remain high. The country still has fewer air passengers in comparison with global benchmarks and the number is expected to pick up with the growth in GDP and improvement in purchasing power. Moreover, India is expected to see the emergence of more centres of growth beyond the metropolitan and Tier-I cities, which would make these important airport destinations
Need to stabilise the regulatory regime: A factor for the success of the privatisation programme has been the development of the regulatory framework. Constitution of an independent regulator, the Airports Economic Regulatory Authority (AERA), and the tariff decisions it has made have been positive, although several uncertainties remain. As the sector is entering the next phase of growth with the government taking steps to privatise/develop more airports, there is a need to build on the learning from the earlier privatisation experience so as to create an operating environment that attracts private investment without unduly burdening users. A key issue would be the regulatory structure pertaining to tariff determination.
Sizeable capex undertaken by private players: The sector now awaits the next stage of development. AAI continues to identify existing airports for expansion/upgrade while also looking to develop greenfield airports. Given the success of privatisation, there could be a case for transfer of management and development responsibilities of stable airports to private players and AAI can place a sharper focus on the development of airport infrastructure in untapped parts of the country.
Challenges to privatisation: Airports are capital intensive projects with a long gestation period. The need to earn a return on this high upfront capex necessitates higher tariffs (evident from tariff increases at many airports), which however may be resisted by the user group. The India airports privatised during 2004-06 witnessed sizeable cost overruns, a significant part of which was borne by users in the form of higher user charges. According to ICRA’s estimates, the cost overrun for the four major airports over the initial estimates was to the tune of 32%.
Traffic growth expected to remain stable; non-aeronautical revenues likely to increase: According to ICRA’s analysis, for developed airports internationally, the share of non-aeronautical revenues is 30-55% as against 23-40% for Indian airports. Going forward, the contribution of non-aeronautical revenues is expected to increase.
Exposure to financial conditions of airlines a risk: Higher reliance on aeronautical revenues has also exposed the sector to counter-party credit risks arising from the financial position of the airlines concerned. Most airlines in India have been under financial stress for several reasons and this has impacted the airports in the form of high receivable levels.
A consolidated analysis of five airport entities (out of the six) in the country – AAI, CIAL, BIAL, DIAL, and GHIAL – shows that the sector’s overall financial performance improved over the period FY2010 to FY2014
The consolidated turnover stood at Rs. 11,822 crore for FY2014 with profit after tax (PAT) at Rs. 1,906 crore.
Your email address will not be published. Required fields are marked *
Save my name, email, and website in this browser for the next time I comment.
Sign me up for the newsletter!
Notify me of follow-up comments by email.
Notify me of new posts by email.
Dr. Jolly Extol RSS Seva at Asian Political Leaders Conference
Indian cricketer and LaLiga India Ambassador Rohit Sharma spoke to Football presenter Joe Morrison on LaLiga Facebook Page at 8 pm on 23rd May 2020
UK Government outlines conditions for elite athletes to return to competitive training
Giving hands are better than praying hands! v Maa Krishna Kashyap, Chairperson, Punyadham Ashram
2014 The Global Indian New Network (TGINN)