Dynamic Initiatives for Revenue Generation

AIBM

October - December 2017

Delegation meeting with Saara Kuugongelwa-Amadhila, Prime Minister of the Republic of Namibia, accompanied by Alpheus !Naruseb, Minister of Works and Transport, Government of the Republic of Namibia; Immanuel Ngatizeko, Minister of Industrialisation, Trade and SME Development, Government of Namibia and Obeth Kandjoze, MP, Minister of Mines and Energy, Government of Namibia on July 31, 2017 at Windhoek

Various initiatives are being undertaken on all fronts to holistically increase the non-aeronautical revenue generation capacity of Indian airports in a bid to have a sustainable revenue stream.

Traditionally, airport operators derive their income from two components: aeronautical and non-aeronautical revenue. Aeronautical revenue comprises the majority of airport’s income, and includes airline terminal space rentals, route navigation facility charges, landing and parking fees, and usage fees for terminals, gates, services, etc. The non-aeronautical revenues come from activities that are undertaken apart from this core business, such as retail, car parking, duty-free shops, and other concessions and rentals.

With construction costs increasing, available funding decreasing and periodic ups-and-downs of the economy affecting the industry along with the unpredictability of airline business cycle, airport operators are now continually looking for additional revenue sources to fund projects and sustain operations and are thus increasingly focusing on non-aeronautical revenue.

With the shifting paradigm, airport operators working as business-oriented service providers are of the view that the revenue generated from non-aeronautical revenue often determines the financial viability of airports.

At medium and large airports non-aeronautical revenue may account for over 50 pc of the total income, growing at a much faster pace than aeronautical income.

Thus, modern airports all over the world are no longer just providing infrastructure for airlines, but have evolved to a more sophisticated market entity with diversified revenue streams. Therefore, airport retail and auxiliary service segments are becoming increasingly important for airport operators who are looking at their significant contribution towards the airport’s non-aeronautical revenue growth.

Airports Authority of India (AAI) as a leading airport operator of the country is emphasising more than ever on identifying the opportunities to generate non-aeronautical revenue through innovation, competitiveness and also by sharing its aviation expertise in India as well as globally.

In the country

AAI is on the verge of generating non-aeronautical revenue by entering into a Memorandum of Understanding (MoU) with state governments for the development of civil aviation infrastructure including surveys, reports, design, maintenance and operations of airports through the professionals and experts available in the organisation. They are also looking at monetising the available land through Public-Private Partnership (PPP) for building hotels, car parks and other facilities by way of city-side development on revenue sharing basis.

Along with that, by participating in the bids for development, operation and maintenance of Greenfield Airports across India, AAI has technically qualified in the bids for Mopa, Goa and Bhogapuram, Andhra Pradesh.

Outside the country

AAI is also certain of boosting its non-aeronautical revenue by submitting Request for Expression of Interest (REOI) for consultancy services of improvement of infrastructure at Kamembe International Airport in Rwanda. Other initiatives that will help boost revenue on an international front include participating in the global tender for Flight Inspection Units; undertaking consultancy projects in Algeria, Republic of Nauru and Tanzania; and imparting training to the delegates of Afghanistan, Bhutan, Ghana, Laos, Male, Nepal, Vietnam and Zambia.

Air Navigation Billing System through SkyRev360, which is a comprehensive e-business solution for data gathering, invoicing and realisation, plays a big role in increasing the non-aeronautical revenue.

SkyRev360 is a joint product of AAI and The International Air Transport Association (IATA).

Recently, AAI won the global bid for ANS Billing system called by Department of Civil Aviation, Laos PDR. A presentation on SkyRev360 had also been given to Civil Aviation Authority of Philippines, Myanmar and Sri Lanka.

With the aim of exploring more business opportunities, AAI has deputed officers from business development, engineering and finance to participate in the various business to business (B2B) events to create awareness of the AAI’s cutting edge technologies. Recently, a team of officials had been nominated to be part of the Indian delegation to Namibia and Zimbabwe, where they held meetings with the Prime Minister and Ministers of Namibia while showcasing the expertise of AAI in the aviation industry.

In order to enhance the non-aeronautical revenue, AAI is strategically exploring various structuring options like joint ventures, PPP, self-operations, as well as alternate revenue models such as revenue sharing backed by minimum guarantee, upfront fees, etc.

AAI is reviewing its role as mere landlords with a new energy to complement the core services and are taking innovative approaches in identifying a long-term source of non-aeronautical revenue, thus maximising the commercial revenue to sustain and serve.

Business Development Team, AAI