Smaller airports' city side to get private facelift

NEW DELHI: India’s rapidly increasing air travellers will in a few years have better facilities and flying experience even at the smaller airports as the government has approved cityside development of non-metro airports through private participation, which will help raise funds for their modernisation.

The Airports Authority of India, or AAI, will lease out land around the airports for 30 years, extendable by another 30 years, for some upfront payment and yearly rentals.

“The ministry will issue formal orders to the authority next week and city-side development of 10 airports in Phase-I will be undertaken, to begin with,” a ministry official told ET.

These airports include Ahmedabad, Jaipur, Lucknow, Amritsar, Indore, Vishakhapatnam, Guwahati and Bhubaneshwar.
The ministry has, however, clarified that maintenance of the terminal building will not be included in the scope of city-side development of the airports, clearly indicating that the intent is not to privatise these airports on the lines of those in Delhi and Mumbai.

The decision was taken by civil aviation minister Praful Patel at a meeting attended by members from the finance ministry and planning commission last week. The plan was stuck because of the differences between the two ministries over giving out the terminal building to private parties for maintenance was resolved.

Airside functions have direct bearing on the terminal building operations and, therefore, it is not advisable to share the terminal building management between two agencies, more so in view of prevailing security scenario, an AAI official said.

“The joint venture and equity participation mode to do so has been ruled out as AAI will not take the business risk by becoming a partner in commercial development on land, which is a non-core business,” the official said.
Commercial development of property on the airports’ land, building and maintaining car parking and cargo operations will constitute the scope of city side development.

“The move was long awaited and will help increase AAI’s non-aero revenues by at least 30% or Rs 400-600 crore to start with and has potential to grow much more,” KPMG director (Aerospace and Defence) Amber Dubey said.
The bid parameters (if upfront payment or revenue share is the fixed component) is yet to be examined, which will throw more light on AAI’s revenues, he added.

There are two sides to an airport: the airside and the cityside. The airside is directly involved in the arrival and departure of aircraft and includes the runway, aprons, control towers, hangars, aircraft maintenance and refuelling facilities.

The city side constitutes commercial facilities around the airport for the benefit of passengers.

AAI is upgrading 35 non-metro airports at an estimated investment of Rs 12,434 crore and is looking at various ways to raise money. The steady rentals from leasing out city side space will help AAI raise funds easily.

The other non-metro airports — Udaipur, Trivandrum, Goa, Madurai, Mangalore, Agatti, Aurangabad, Khajuraho, Rajkot, Vadodara, Bhopal, Nagpur, Trichy, Coimbatore, Patna, Port Blair, Varanasi, Agartala, Dehradun, Imphal, Ranchi, Rajpur, Agra, Chandigarh, Dimapur, Jammu and Pune – will be taken up in the second phase.

AAI currently possesses a total land bank of about 45,000 acre across various airports in the country. It has an equity base of Rs 623 crore as on April 2010. The country’s largest airport operator manages 128 airport in the country, which include 14 international airports, 25 civil enclaves and 8 customs and 81 domestic airports.

AAI’s finances have been impacted due to close of the Hyderabad and Bangalore airports following the launch of brand new private sector-developed airports in these two booming cities.