Never before have Indians been more comfortable with travelling by air, evident from the more than 20% rise in the number of air passengers in the last three years. Helping this rise are factors like inexpensive fares catalysed by intense competition between domestic players and a middle class with growing disposable income. If there is a dampener in this story, it is the lack of infrastructure to feed the booming demand for air travel.
Indian airlines flew more than 139 million passengers in 2017, a 17% increase over the preceding year. As per Airbus’ India market forecast, domestic traffic is expected to grow five and a half times over the next 20 years. The budget for 2018-19 unveiled an ambitious plan for the aviation sector, aiming at upgrade of airports to facilitate travel of a billion passengers annually. The government has estimated a whopping expenditure of Rs 4 lakh crore and 15-20 years of meticulous planning to achieve this target.
However, the near-term scenario is far less promising. While airports in New Delhi and Mumbai boast world-class facilities, most of India’s major airports are functioning close to or above their design capacity. Take for example the Mumbai airport which has to deal with regular delay in flight schedules. It will breach its ceiling of 48 million passengers per annum this year. With the second airport at Navi Mumbai still five years away, airport saturation in the country’s financial hub could impact the growth of the sector. The airport at Chennai too will reach saturation level during the course of this year.
Experts say that though building a second airport could be a long-term solution, upgrading facilities at existing airports is a must in the interim. “The government will have to find ways of increasing the efficiency of the existing airports. Bottlenecks with regard to ATC operations, security checks, turnaround of aircraft, etc will have to be removed,” Kuljit Singh, partner and industry leader, Infrastructure at EY tells FE. Not helping matters are loopholes in the Centre’s public private partnership model to upgrade airports, evident from the problems dogging the modernisation of Ahmedabad and Jaipur airports. According to Singh, the government needs to ensure that the larger private players remain in the sector by guaranteeing them reasonable returns on investment.
“If not, you’ll be left with smaller investors with little or no experience in managing airports,” he says. The government announced last year an investment of Rs 17,000 crore to upgrade airport infrastructure. The Airports Authority of India (AAI) has plans to invest Rs 15,000 crore over the next 3-4 years. It has identified land for development at airports in Bhubaneswar, Kolkata, Varanasi and Lucknow. It will be going in for borrowings for the first time, apart from an enhanced Rs 4,100-crore capex target for 2018-19. It also plans to award contracts worth Rs 15,000 crore for new terminal buildings in Chennai, Ahmedabad, Pune, Jaipur and Lucknow over the next few years. To boost its non-aeronautical revenues, it will sell off 5% of its 55,000-hectare land bank.
As for the Ministry of Civil Aviation, it has appointed a consultant to implement its plan to enhance airport capacity. However, at a time when the ministry is going all out with its Regional Connectivity Scheme, the efforts to plug the gaping holes in the aviation infrastructure leave something to be desired. That is if the double-digit growth that domestic traffic has witnessed in recent years is to be sustained.
By: Arun Nayal