Airport privatization 3.0 to lift off after elections

AAI to privatize 13 airports and sell residual stakes in Bengaluru and Hyderabad

An increasing number of airports in India will sport private-sector owners, as their state-owned operator prepares to privatize 13 more airports in the coming months. The plan will also include the sale of its residual stake in the bigger airports of Bengaluru and Hyderabad, according to two senior officials aware of the matter.

Airports Authority of India (AAI) plans to kick off the third phase of airport privatization after the general elections, beginning with sale of its remaining 13% stake in Bangalore International Airport Ltd (BIAL) this year, the officials said on condition of anonymity.

“The plan is to be implemented after the new government takes over in June,” one of the officials said. “Along with Bengaluru, AAI will look to sell its stake in Hyderabad airport as well.”

Currently, financial investor Fairfax (Fairfax India Holdings Corp) owns around 64% of BIAL, which operates the Bengaluru airport. Siemens Project Ventures GmbH holds 10%, while AAI and Karnataka State Industrial and Infrastructure Development Corp. hold 13% each.

GMR Hyderabad International Airport Ltd, 74% owned by the GMR group, operates the Hyderabad airport. The Telangana government and Airports Authority of India own 13% each.

Queries sent to AAI, Bengaluru airport and Hyderabad airport remained unanswered till press time.

As part of airport privatization 3.0, AAI plans to invite bids for operation, management and development of 13 other airports in public-private-partnership mode, the officials added.

Among these are six airports— Bhubaneswar, Trichy, Indore, Raipur, Amritsar and Varanasi— that are among the top 20 airports operated by AAI in terms of passenger traffic.

These six will be clubbed with seven loss-making small airports— Kushinagar (in Uttar Pradesh), Gaya (Bihar), Hubballi (Karnataka), Aurangabad (Maharashtra), Jabalpur (Madhya Pradesh), Tirupati (Andhra Pradesh) and Kangra (Himachal Pradesh).

The plan is to target infrastructure growth across both major and minor airports, one of the officials said.

“Under the first step, AAI is likely to float a request for proposal and invite bids for leasing 13 airports for a period of 50 years,” the official added. “The plans for divestment of stake and publicprivate partnerships have been in the pipeline for some time now, but we expect the implementation this year.”

“Given that Indian airports have huge growth potential for nonaero revenues when compared to their global counterparts, and given the high growth in passengers and spend per passenger, we expect the growth to remain strong,” said Vinay Kumar G., vice president & sector head - corporate ratings, ICRA Ltd.

Plans to privatize about 25 airports and sell Airports Authority of India’s stake in the airport compa

nies in Delhi, Mumbai, Hyderabad and Bengaluru are part of the National Monetization Plan (NMP) announced in September 2021, with the aviation sector expected to contribute 3.5%.

Under the NMP, the government had identified 25 AAI-owned airports and four private-sector owned metro airports to raise ₹21,000 crore between 2022 and 2025.

This includes around ₹10,000 crore from the sale of AAI’s stakes in the four major metro airports and an additional ₹11,000 crore from leasing 25 AAI-operated airports to private entities.

The first phase of airport privatization, which began in the 2000s, included offloading stakes in Delhi and Mumbai airports, and the development of greenfield airports in Bengaluru and Hyderabad.

The second phase, which happened in 2019, involved the privatization of six AAI airports in cities like Ahmedabad, Jaipur, Trivandrum, Mangalore, Lucknow, and Guwahati. The Adani Group had emerged as the highest bidder in terms of per passenger fee for the six airports. These have been leased to Adani Group for operation, management and development for a period of 50 years.

In FY23, AAI received ₹3,020.55 crore in lease revenue from the joint venture airports in Delhi and Mumbai, lifting its overall revenues. Additionally, the six PPP airports leased to Adani Group generated ₹683.86 crore through annual concession and upfront fees, more than doubling the previous year’s ₹329.59 crore.

AAI’s total revenue for FY23 was ₹12,172 crore, nearly dou

For FY23, AAI got ₹3,020.55 cr in lease revenue from the joint venture airports in Delhi and Mumbai

bling from ₹6,841 crore in FY22.

Under the public-private partnership agreement, the operators of Delhi and Mumbai airport pay 45.99% and 38.7% of the gross revenue, respectively, to AAI.

For Bengaluru and Hyderabad airports, the model entails payment of 4% revenue as annual concession fee. For the six airports that were leased to Adani in 2019, AAI charges per-passenger fee.

Passenger traffic at five major private airports (Delhi, Mumbai, Bangalore, Hyderabad, Kochi) crossed the pre-covid level in FY24. However, the traffic at major AAI-operated airports (Chennai and Kolkata) recovered to only about 90% of pre-covid levels during last fiscal (FY2024), Icra said.

“Historically, in terms of passenger traffic growth as well as cargo growth, the private airports have performed better than AAI-operated airports,” Kumar of Icra said. “Further, the private participation in airports has resulted in better amenities and infrastructure, resulting in improved passenger experience and non-aero revenues for the operators.”