AAI’s annual infrastructure spending poised to jump twofold

By: and |
Updated: March 25, 2016 12:29:23 AM

Airports Authority of India (AAI) will have to double its infrastructure spending to around Rs 4,000 crore a year over the next three years to expand capacity of at least half a dozen airports

AAI has pegged its spending on infrastructure at Rs 1,900 crore (Budget estimate) this fiscal which is about 26% of its total expenditure. (Reuters)AAI has pegged its spending on infrastructure at Rs 1,900 crore (Budget estimate) this fiscal which is about 26% of its total expenditure. (Reuters)

Airports Authority of India (AAI) will have to double its infrastructure spending to around Rs 4,000 crore a year over the next three years to expand capacity of at least half a dozen airports to handle the rapid passenger traffic growth seen in the first 10 months of the current fiscal, which is likely to be sustained in future also. The cash-rich company has been spending nearly Rs 2,000 crore annually to refurbish and augment airport capacity in the last three years but will now need to ramp it up to about Rs 12,000 crore over the next three years.

Cheaper crude has seen the aviation sector pick up momentum this fiscal with several tier-2 airports posting over 25% passenger traffic growth.

This has brought some, including those at Ahmedabad, Lucknow, Jaipur, Patna, Varanasi, Pune, Chandigarh and Visakhapatnam, near saturation capacity.

“We plan to invest around R6,200 crore in expansion and upgradation of the current airports in the next three to four years. We will be investing around R880 crore for expanding the Lucknow airport, around Rs 850 crore for Tiruchirappalli airport, around R2,000 crore for the Chennai airport, R900 crore for the Guwahati airport and around R300 crore for Leh, Srinagar and Dehradun,” Mahesh Sharma, minister of state for civil aviation, told FE.

AAI has pegged its spending on infrastructure at Rs 1,900 crore (Budget estimate) this fiscal which is about 26% of its total expenditure. The company’s infrastructure spending has seen a decline over the last three years but is estimated to be the highest ever this fiscal.

The domestic passenger capacity of the country currently stands at 70 million per annum but there is a need to augment capacity to handle 100 million passengers in two to three years, former AAI chief VP Agarwal told FE. He added that although the expansion plans for some of the airports are already on paper, the company needed to start work immediately to avoid massive congestion by FY19.

“The worsening congestion at airports has the potential to put paid to all the growth plans for the sector if it’s not dealt with immediately. We are already facing severe shortage of slots at airports like Mumbai while parking is a major constraint at several other airports,” a top executive at an airline told FE. He added that the delay in parking spot allotment leads to higher turnaround time, excess fuel use and affects general efficiency thus raising cost.

Analysts say that increased focus on regional connectivity and tourism aided by e-visa facility have complemented the favourable conditions for airlines. Almost all major airlines have started new routes and augmented capacity on existing ones. For instance, Air India launched flights between Vizag and Port Blair and Delhi while Air Costa launched flights between Hyderabad and Vizag. Similarly, Indigo has enhanced its network to and from Lucknow and increased frequency between Bengaluru and Jaipur to twice daily.

“E-visa facility has significantly contributed to increasing tourist demand at several airports. However, increasingly routes have shown high load factors of 85-90%, which indicate possible signs of heating up in the times to come,” said Abhay Krishna Agarwal, partner, infrastructure & PPP at EY. He added that there was a need to separate several airports that work within a defence enclave which restricts landing and parking facility for wide-body aircraft.

Other airports like those at Indore, Raipur, Vadodara, Udaipur and Bhopal have also witnessed above 25% growth in passenger throughput mainly on account of significant latent unserved or under-served demand being captured by airlines, either by deploying additional capacity or utilising existing capacity connecting these airports with metros or other tier II cities and in some cases international airports as well.

Terminal Decline

Rapid passenger growth of over 20% this fiscal severely congesting airports

Half a dozen airports witnessed traffic growth of as much as 35%

Capacity expansion at airports requires an investment of R12,000 crore over 3 years

AAI plans to invest only half of required amount in the next 3-4 years

Congestion leading to higher turnaround time and lower efficiency for aircraft

Mumbai airport refused to grant any more slots this year due to congestion

Ahmedabad, Lucknow, Jaipur, Varanasi, Pune and Visakhapatnam among most constrained airports

 

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.