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Business News/ Companies / News/  Adani Group ready for dominance in aviation

Adani Group ready for dominance in aviation

Adani Enterprises is set to become the largest private sector airport operator

Adani Enterprises Ltd (AEL) will take control of the airports in Ahmedabad, Lucknow, Mangaluru, Jaipur, Thiruvananthapuram and Guwahati ( lamy)Premium
Adani Enterprises Ltd (AEL) will take control of the airports in Ahmedabad, Lucknow, Mangaluru, Jaipur, Thiruvananthapuram and Guwahati ( lamy)

MUMBAI:Adani Enterprises Ltd (AEL) is set to become India’s largest private airport operator, marking a step forward in its ambitious plan to establish a dominating presence in the civil aviation sector as it has in its current businesses of ports and energy.

The Adani Group flagship will become the largest operator of airports other than state-run Airports Authority of India (AAI), which runs most of the airports, with the Union cabinet approving the transfer of six airports on 50-year leases to AEL. The company will take control of the airports in Ahmedabad, Lucknow, Mangaluru, Jaipur, Thiruvananthapuram, and Guwahati. These will be leased for operation, management, and development in a public-private partnership model. AEL won the contracts after offering to share the highest revenue-per-passenger with AAI during a bidding process that concluded in February 2019.

AEL’s plans have faced headwinds with the economic disruptions caused by covid-19, especially in the civil aviation sector. Passenger demand for air travel will contract by 49% this year for domestic airlines because of the pandemic, global airlines body International Air Transport Association (IATA) had said in July. The Adani Group is also facing opposition from the Kerala government over the Thiruvananthapuram airport.

Adani has sought from the government time till February 2021 for the official handover of the Ahmedabad, Lucknow, and Mangaluru airports citing the pandemic. AEL is thus likely to take charge of the second batch of three airports later.

In its FY20 annual report, AEL gave a glimpse of its ambition to be the largest private airport developer in the country, breaking the duopoly of the GMR and GVK business groups. The report lists its aim for the airports division as developing world-class infrastructure at airports, both at airside and landside, enhancing the passenger experience, creating entertainment destinations (aerotropolis, airport village, hotels, and malls), increasing domestic airline connectivity to new and under-served destinations, and increasing flights to long-haul destinations in the West and also to South-East Asia.

For an airport operator, the major chunk of revenue comes from the captive entertainment destinations such as an aerotropolis, hotels and shopping malls. The revenue streams are typically split between aeronautical revenues (land fees, user development fees, cargo and ground handling, parking and housing fees and aircraft fuelling) and non-aeronautical revenues (duty-free shops, retail licences, food and beverage, advertising, space rentals, car parking, and development rights on land adjacent to the airport).

The six airports that AEL has won have a current non-aero spend of 80 per passenger while the largest of India’s privatized airports—Delhi, Mumbai, Bengaluru and Hyderabad—have a non-aero spend of 200-300 per passenger, CLSA said in a 2019 report. The potential to double or triple this revenue stream, along with the 227 acres of city-side land available to AEL for development as the concessionaire, is considerable.

In a February report, property consultant Knight Frank India estimated that India’s airport retail market will grow to $9.3 billion by 2030 from $1.4 billion in 2019. The real estate opportunity for airport operators in India is projected to be $1.6 billion by 2030. In case of key markets such as Mumbai and Delhi, airport retail developments garner revenue of 2.4 times and 2 times that of most successful malls in cities.

That AEL’s focus would be on maximising non-aeronautical revenue streams was clear from its appointment of Ben Zandi as chief executive officer of its airports division. Zandi previously headed the North American business for German airport developer Fraport AG and has decades of experience in hospitality and non-aeronautical services.

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Published: 23 Aug 2020, 10:32 PM IST
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