Tuesday, January 02, 2018

This big step by Narendra Modi govt a must to boost airport infrastructure

New Delhi: India is now the third largest domestic aviation market in the world with 100 million passengers surpassing Japan according to a report by Centre for Asia Pacific Aviation (CAPA). Thus, it is of paramount importance to scale up airport infrastructure in the country to account for the increase in aviation activity. In addition, profitable business models for airports that will provide a significant boost to the aviation ecosystem and the economy need to be identified. A strategy that allows for financing of aviation infrastructure in India while giving investors avenues to park their capital is arguably through the monetisation of the land bank of the Airport Authority of India (AAI). This monetisation of the land bank has been the subject of intense public debate and it is time for India to move from debates to concrete action, namely, monetise the land bank and allow such airport land to be used for non – aero activities.

Non-aero revenues for airports in India according to the Airport Authority of India (AAI) are in the 20-25% range of total revenues earned while the number for airports globally is anything between 40 to 60 percent of total revenues. This non-aero revenue allows airports to be less dependent on aero revenues for business and allows profitable airports to invest into new infrastructure. In India creating airports that can use their own assets, namely land banks to create capital for infrastructure
growth will be crucial. Monetisation of land banks will allow airports to create efficient financing schemes for infrastructure growth to both upgrade existing airports and build new ones The Airport Authority of India has a land bank of approximately 55,000 acres mostly in urban areas. If it could monetize even 10% of this land bank, much needed infrastructure can be created. It is important to start looking at non-aero airport infrastructure beyond retail and hotel facilities.

Land around airports can be used for the development of business parks and corporate campuses especially in tier 2 cities such as Bhubaneswar and Ranchi in India where corporates can take advantage of the relatively lower cost of labour and land relative to the larger metro cities to create employment opportunities with a more efficient cost base. Tier 2 cities in India also need modern  trade, exhibition and convention centres, and land around airports can be a site for such properties. Land banks around airport also provide an opportunity for low cost no frills affordable housing projects. Given the focus on affordable housing in India, monetizing airport land banks to create capital to fund infrastructure via construction of affordable homes achieves a twofold aim. And quite apart, airports located near economic centres of trade need to develop a cargo business to aid in greater trade flow for high value time dependent products.
02/01/18 Taponeel Mukherjee/Financial Express