Over the next 10 years, ICRA estimates that the per passenger (pax) non-aeronautical revenue for Indian airports would grow from the current levels of Rs. 182 to Rs. 410, at Compounded Annual Growth Rate (CAGR) of 8.4%. The total non-aeronautical revenues at Indian airports are expected to reach Rs. 16,150 crore in FY2025 – CAGR of 16.6%, says ICRA in its study on Indian Airports.
Over the last 10 years, non-aeronautical revenues at Indian airports have increased at a CAGR of 22.9% – from Rs. 450 crore in FY2005 (when AAI was the sole airport operator) to Rs. 3500 crore in FY2015. Nevertheless, when compared to international levels, the non-aeronautical revenues on per pax basis at Indian airports are underpenetrated, presenting a strong growth driver.
Commenting on the revenue trends, Mr. Harsh Jagnani, AVP- Corporate Sector ratings, says, “As many international airports have evolved over the years in terms of generation of non-aeronautical revenues, the same can be expected from the Indian airports. The increase in scope of activities at the airports and growing commercial orientation of the airport operators are expected to drive the growth in non-aeronautical revenues at Indian airports.”
Over the years, airports have evolved from being purely an infrastructure provider to a sophisticated market entity with diversified revenue streams. This has led to the emergence of non-aeronautical revenues which have become a key contributor to an airport’s revenues. Revenues from non-aeronautical activities chiefly consist of fees for the rights to operate businesses at the airport, and rental of leased land and premises. Some of the common non-aeronautical activities are: food and beverage, duty-free shops, banks/foreign exchange, advertising, leasing of terminal space, car rentals/parking, transport services, hotels/motels. ICRA has benchmarked the non-aeronautical revenue generation at Indian airports against the international airports. For this, ICRA has analysed 25 international airports/airport groups together encompassing 132 airports and including 21 of the 50 busiest airports in the world, with total passenger base of 1700 million and non-aeronautical revenues in excess of Eur 11 billion.
Mr. Jagnani elaborates on the differences in non-aeronautical revenue generation at Indian and international airport: “Non-aeronautical revenues constitute 25% of the total revenues for Indian airports, whereas their contribution stands at 37% for the ICRA Sample of international airports. On a per pax basis, the non-aeronautical revenue in India stands at Eur 2.52 (for FY2015), which is significantly lower than Eur 5.80 for the ICRA Sample of international airports. The average for European airports is Eur 6.58, for Asian at Eur 5.69, and for North American at Eur 4.53.” Emergence of non-aeronautical services can be attributed to many factors such as: the regulated nature of aeronautical revenues, which offers limited scope of growth; attractiveness of an airport as a retail destination which can translate into high rentals/revenue share; expanding scope of activities at airports; growth in passenger traffic which has increased the addressable market; attractive location of an airport which can make it a retail and commercial destination; and relative resilience of non-aeronautical revenues to short term fluctuations in traffic. Also, proportion of international traffic has a significant bearing on the relative non-aeronautical revenue generation. This trend is observed at international airports as well as at Indian airports.
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