No slowdown here

Written by Debabrata Das | Updated: Aug 28 2013, 15:09pm hrs
It isnt the best of times at the Airports Authority of India (AAI). The body that runs 125 airports has seen a particularly bad quarter this time. Aircraft movements at its airports are down, and so are its profits. Still, looking ahead, the state-owned airports operator is moving full steam ahead with its programme of setting up new airports and modernising old ones.

In a weak operating environment, aircraft movements have fallen 0.5% in the June quarter for the AAI, leading to a 28% fall in its net profitto R167.52 crore from R230.44 crore a year ago. But that hasn't affected its capital expenditure programme. In the first quarter, the AAI has spent nearly 30%, or R887 crore, of its targeted annual capex of R3,006 crore.

The schedule for the next five years is hectic, with the AAI targeting development of 20 new airports and modernisation of 25 existing ones. Chairman VP Agarwal has been especially focusing on airport development. Under himsince January 1, 2009the AAI has developed and upgraded 58 airports.

The task of such large-scale modernisation was not easy. Huge funding, along with large gestation periods for completing airport projects, was the biggest deterrent, says Agarwal. However, a balanced approach of utilising internal resources, debt and cost cutting helped us fund the projects. Even the recession didnt stop us from completing the projects on time and posting decent profits, he said.

The AAI is hopeful of keeping the same pace of development that it had kept in the past five years. But this time, since a majority of projects are greenfield, it has called for support from the state governments.

Subject to co-operation from the respective state governments and access to suitable sites free of cost, the AAI should be able to develop 20 airports in the next five years, GK Chaukiyal, member (operations), AAI, said recently.

The AAI expects to compete the modernisation of Chennai and Kolkata airports this year on schedule, and open the Chandigarh Airport, on time, in mid-2014.

The Chandigarh Airport will be coming up on a new site and for that work is going on. Hopefully, we will be able to complete it by mid-2014, said Agarwal. Once completed, it will be an international airport.

My first priority is to ensure that when we deliver these infrastructural facilities, we should be able to put it to use fully and these should be user- friendly, he added. My idea is to ensure that we commercialise this infrastructure because once the infrastructure is in place, more uses can be derived from it. The airport infrastructure needs to be fully-utilised so that the best return on investment can be gained.

Senior AAI officials said funding for the future projects wont be an issue. Unlike the ministry of civil aviations other high profile undertaking, Air India, AAI has been a profitable enterprise. Provisional numbers show AAI generated a net profit of R655.66 crore last fiscal.

Apart from cash generated from operations, we plan to raise R1,000 crore through a bond issue. Also, there should be extra cash coming in from the addition of a private partner for Chennai and Kolkata airports, said a senior AAI official on condition of anonymity.

Public-private partnership has helped AAI scale up on revenues in the past and it expects similar results once the management of Chennai and Kolkata airports is handed over to a private partner. AAI expects annual revenues from Chennai airport to go up to R550 crore from the present R150 crore after the privatisation is complete.

Before working with private partners in the management and operation of airports, AAI's revenues in 2007-08 were R4,829 crore, of which the western and norther regions, which included Delhi and Mumbai airport, contributed nearly 44% or R2,145 crore. After the privatisation of Delhi and Mumbai airports, in 2011-12, nearly 56% of AAIs annual revenues of R5,876 crore came from the western and northern regions.

Successful projects have been delivered at Cochin, Hyderabad, Bangalore, Delhi and Mumbai, in the form of private or joint venture airports. However, airports at tier-II and tier-III cities are not financially viable for the private sector, therefore, development of these airports are funded from AAIs internal resources, Agarwal said.