1. How AAI monetising its land could make flying cheaper

How AAI monetising its land could make flying cheaper

AAI monetising its land will not just help it make more money, it could make flying cheaper, too

By: | New Delhi | Updated: February 6, 2017 10:31 AM
Malls, convention halls and restaurants are more likely to attract consumers than hotels in land around airports in small cities. (Representative Image: Reuters) Malls, convention halls and restaurants are more likely to attract consumers than hotels in land around airports in small cities. (Representative Image: Reuters)

By letting the (AAI) monetise its land assets—finance minister Arun Jaitley announced this in his Budget speech—the government has ensured that not just the airport operator but also flyers benefit. Non-aeronautical revenues, chiefly from utilisation of land and realty, account for 60% of revenues of most airports globally. In comparison, just 20% of AAI airports’ revenues come from this. Changing the AAI Act to allow wider usage of its land—over 55,000 acres—than just for hotels (one of the usage permitted so far) will create more sustainable revenue streams. Malls, convention halls and restaurants are more likely to attract consumers than hotels in land around airports in small cities.

While the proposal is a leg-up for AAI, the promising part is that once non-aero revenues start rising, it will lessen the burden on aeronautical revenues or the earnings from what AAI charges airlines for using its airports, something that AAI chairman GP Mohapatra has also said, as per The Economic Times. It is likely that airlines will pass on this easing to flyers as well, making tickets that much cheaper. Given how this could mean flying out of smaller cities could get cheaper, it may spur traffic to and from these cities, leading to greater connectedness which has its own spillover benefits.

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