S Raheja

AIBM

July - September 2017

S Raheja, Member (Planning), Airports Authority of India

S Raheja, Member (Planning) of Airports Authority of India (AAI) talks about the various plans that AAI has in place to ensure the successful growth of the Indian aviation sector. He discussed how AAI is trying to provide a strong backbone to various government initiatives while also finding new methods to become a self-sustainable body.

How does India factor into the booming aviation sector in Asia where airport operators and governments are competing to build bigger and more airports?

The fast paced growth of the Indian economy is reflected in the ever increasing passenger and cargo traffic at Indian airports. Double digit growth has been registered in passenger traffic consistently during the last three years. Not only airports in metro cities, but other major airports are also witnessing heavy rush during peak hours. The total aircraft movements in 2016-17 was 20,49,085, registering a growth of 14.1 pc over previous year; total passenger movement stood at 264.96 million, a growth of 18.3 pc over previous year; and total freight was 29,78,241 metric tonne, an increase of 10.1 pc over previous year. To cater to the ever increasing demand, it is imperative that AAI as custodian of majority of Indian Airports takes timely action for expansion of existing airports and development of new airports.

What is the current policy/aim of the infrastructure department?

AAI is following airport infrastructure policy of the Government of India (GoI). Apart from development of modern world class airport infrastructure in the country, with unveiling of National Civil Aviation Policy (NCAP) 2016, AAI has also allocated its resources for making flying affordable to masses under Regional Connectivity Scheme (RCS) – ‘Ude Desh ka Aam Nagrik’ (UDAN). According to the Directorate General of Civil Aviation (DGCA), Indian carriers are expected to add at least 63 new and leased aircraft by December 2017.This will require additional parking bays for night parking of aircraft. It has been assessed that 170 additional parking bays will be required at AAI airports out of which AAI has started the process for taking up construction of 130 parking bays at airports where the land is available with AAI. Request for additional land has been sent to various state governments for the remaining airports.

Induction of aircraft in the fleet of airline operators in India will spur the demand for Maintenance, Repair and Operations (MRO) services as well. AAI is formulating a policy for allotment of space to MRO providers at its airports. AAI is committed to provide airport infrastructure ahead of demand at its airports in the country.

Aviation in India is being developed for masses and is crucial for sustainable development of trade and tourism. How do you see the emerging infrastructure in the sector developing in India?

AAI is planning to revive un-served/ under-served airports under RCS UDAN. Terminal Building for no-frill airports will be constructed in modular concept to enable future expansion. At some places, temporary portable cabin type infrastructure will be erected to meet the GoI’s timelines for implementation of RCS. Subsequently, these will be replaced by regular facilities. Only essential facilities for operation will be provided initially till the scale of operation is increased to convert it into a commercial model. Locally available/produced materials will be utilised for construction of airports and AAI is also imparting training to local youth under ‘Skill India’ initiative of the GoI.

According to the civil aviation secretary R N Choubey, a sum of USD 10 billion will be spent in the next five years to develop airport infrastructure in India. What are the prospects and challenges to such an ambitious target?

Presently available capacity at Indian airports is 282 Million Passengers Per Annum (MPPA), whereas the demand for 2016-17 is 264.96 MPPA. Demand forecasted for 2020-21 is 396 MPPA. There are plans for creating additional capacity of 154 MPPA within the next four to five years, in which 56 MPPA additional capacity will be created in AAI airports like Chennai, Srinagar, Pune, Dehradun, Lucknow, Mangalore, Jaipur, Goa, Agartala, Guwahati, Leh, Patna, Bihta, Trichy, Vijayawada and Jabalpur; 98 MPPA additional capacity will be created in joint venture/private/ state government airports.

AAI is in the process of awarding Project Management Consultants (PMC) for expansion of 13 airports and plans have been made for expansion of another 12 airports, subject to availability of land. Meanwhile, efforts are being made to optimise the usage of terminal space to enhance the capacity of these airports. Similarly, greenfield airports are also being constructed in various cities.

AAI has already prepared the roadmap and action plan for meeting the challenges of creating the requisite capacity in time. It is proposed to have an investment of INR 175 billion in the next five years. This covers the upgradation and expansion of existing airports, revival of non-operational airports, up-gradation of Air Navigation Services (ANS) infrastructure and the telecommunication infrastructure. Furthermore, AAI will provide logistical and technical support to the state governments for bringing up greenfield airports.

What’s the difference between the projects built and operated by AAI and those under Public-Private Partnership (PPP) mode?

In my opinion, apart from the mode of funding and revenue generation schemes, there is no major difference in the projects built and operated by AAI and under PPP mode in the infrastructure and facilities per se. Private operators have flexibility to adapt for monetising the assets and generating more non aeronautical revenue according to changing marketing strategies, and bringing more efficiency in operations thereby reducing expenditure.

AAI being a Public Sector Enterprise has inherent constraints, at the same time is developing airports in remote areas and cannot just focus on profit making. Notwithstanding the above, AAI is in the process of overhauling its commercial policy to make it relevant to modern times by adopting innovative marketing techniques so that major AAI airports are able to generate sufficient revenues required for maintenance and development of airports in the country.

Is India following the global trend of building more airports and developing infrastructure around it?

It is true that airports in India are being built to serve connectivity and business needs as well as providing a lifestyle experience destination. There are plans for development of major airports under AAI. GoI has granted in-principle approval for setting up 15 greenfield airports, which includes Pakyong Airport being developed by AAI in Sikkim. There are also plans for development of second airports in the cities where the existing airports are saturated and cannot be expanded.

Delhi, Chandigarh and Durgapur airports have been developed on aerotropolis concept, out of them the Delhi Aerocity is throbbing with activities. With passage of time other airports are also likely to catch up with the trend. AAI is making plans for cityside development at major airports to increase the non-aeronautical revenue for AAI as well as local employment generation, so that AAI remains a selfsustaining entity in the future.

Does the building of greenfield airports in India meet global standards?

Majority of the greenfield airports are being developed under PPP mode by the respective state governments. All the greenfield airport developed so far – Cochin, Hyderabad, Bengaluru, and Durgapur, have fulfilled the need for modern airport infrastructure with state-of-the-art facilities. The greenfield airport in Pakyong, Sikkim is expected to be operational in September 2017.

The policy paper on airport infrastructure mentions that financing of airport infrastructure has some inherent problems. These projects have a large element of sunk cost, a very long gestation period and highly uncertain returns on investment based on several assumptions of traffic growth that may fail to materialise. With all these ambitious projects, how do you plan to meet the financial requirement?

No doubt there are many inherent problems in financing airport infrastructure as stated above but nonetheless the airport industry is witnessing a robust growth. Also GoI with its NCAP-2016 has proposed to promote the growth of the Indian aviation sector in a significant manner as the development of this sector has a multiplier effect on the economy. RCS UDAN of the NCAP-2016 endeavoured to take flying to the masses by making it affordable. For this purpose, there should be adequate airport infrastructure across the length and breadth of India to support the traffic growth as required. Also the GoI has mandated that in future, airport projects should essentially have cost efficient functionality with no compromise on safety, security and efficiency. AAI will take up only those projects that are financially viable. State/central government will provide Viability Gap Fund (VGF) to AAI, if the project is strategically important but financially unviable.

Presently, AAI is in a comfortable position due to prudent control over the operating costs and on-going efforts to increase non-aeronautical revenue. Considering all these factors, AAI has chalked out an ambitious capital expenditure plan of INR 175 billion during the period 2017-2022. Proper plans are in place to finance the capital expenditure towards our endeavour of providing airport infrastructure required to meet the robust demand.

Post-privatisation, AAI is still the central agency for the development of the country’s airport infrastructure and has an active role in development of several airports and related infrastructure. How do you see the role of AAI in developing airport infrastructures in India?

Every private airport developer wants to undertake development of one or two profit making airports that can generate operational profits faster, whereas AAI develops airports throughout the country, even if these airports may not generate sufficient revenues in the first couple of years. AAI is developing not just airports but a network of airports that provides fast connectivity between various places in the country. AAI is also committed to meet the socio-economic needs of the remote regions and Tier II and Tier III cities of the country.

AAI is preparing new set of regulations for monetisation of its land assets so as to reduce its dependence for revenue on aeronautical sources, what do you have to say about that?

AAI has huge opportunities to create facilities and generate revenue by developing the land parcels on cityside of airports; to cross-subsidise and rationalise the aeronautical charges; and to meet the aeronautical infrastructure needs. At present in Phase-I, cityside development has been planned at Amritsar, Bhubaneswar, Kolkata, Varanasi, Jaipur, Lucknow, Tirupathi and Raipur airports and multi-level car parks have been planned at Chennai, Kozhikode, Amritsar, Jaipur, Ahmedabad and Pune airports.

As identified by NCAP-2016 on restrictions on the use of land allocated for commercial use of an airport, amendment to AAI Act-1994 has also been initiated to unlock the potential of the land on city-side and liberalise the end-use restrictions for existing and future greenfield and brownfield airports of AAI as well as under PPP mode.

The amendment of the AAI Act-1994 has been proposed with the objective to allow greater flexibility of land use; to prepare schemes for use of land in conformity with the provisions of AAI Act; to develop AAI land for commercial use for the purpose of generating revenue by non-aeronautical measures; to provide impetus to raise revenue from non-aeronautical commercial sources; and to rationalise and optimise the airport charges. Development of non-aeronautical activities will also make it possible to enhance regional connectivity as propagate by GoI under UDAN.