As Government leases Airports under PPP, here is how they have performed so far
Sai Krishna Muthyanolla
August 29, 2020
The government announced leasing out six major airports through PPP mode while six more are in the pipeline. But what has been the performance of these airports like, in the last few years? How many of the AAI managed airports made losses and how many are profitable?
Recently, the Union Cabinet chaired by Prime Minister Narendra Modi approved the proposal to lease out three airports of the Airports Authority of India (AAI) – Jaipur, Guwahati, and Thiruvananthapuram, through Public Private Partnership (PPP), to Adani Enterprises. The government’s press release states that the company was declared as the successful bidder in a Global Competitive Bidding conducted by AAI and will be taking over charge of operations, management, and development for a period of 50 years.
Government claims that PPP model has helped in the creation of world class airports
The government claimed that PPP model  has helped create world class airports and also deliver efficient and quality services to passengers. Further, it has also helped increase revenue and the work on developing airports and air traffic infrastructure in India. The revenue received by AAI through PPP operational model has also helped develop infrastructure facilities in Tier-2 and Tier-3 cities and upgrade the airports there to international standards.
Modi’s vision 2025 is to privatize 30-35 airports under PPP
According to the report of the Task Force constituted in the Department of Economic Affairs, the Prime Minister’s vision for Airport Sector in 2025 is to improve India’s rank in global aviation market. By 2025, 30 to 35 airports owned by AAI will be privatized as PPPs. So far,  six (6) airports have been privatized, namely, Lucknow, Ahmedabad, Jaipur, Mangalore, Thiruvananthapuram, and Guwahati. However, the Kerala government has opposed the privatization of Thiruvananthapuram airport. Reports suggest that the bid to privatize another six airports- Tiruchirappalli, Bhubaneswar, Amritsar, Raipur, Indore, and Varanasi will soon be open.
AAI was constituted in 1995 for managing civil aviation infrastructure
The Airports Authority of India (AAI) was constituted by an Act of Parliament and came into being on 01April 1995, by merging erstwhile National Airports Authority and International Airports Authority of India.  The merger brought into existence a single Organization entrusted with the responsibility of creating, upgrading, maintaining, and managing civil aviation infrastructure both on the ground and air space in the country. AAI manages a total of 137 airports which include 24 International airports, 10 Customs Airports, 103 Domestic airports, and 30 civil enclaves. As of 2018-19, a total of 126 airports were being managed by AAI.
Gujarat has the maximum number of airports managed by AAI
Gujarat with 11 is home to the maximum number of airports managed by AAI. This is followed by 9 in Uttar Pradesh and 8 each in the states of Assam, Maharashtra, Madhya Pradesh, and Tamil Nadu. There were 7 airports each in the states of Andhra Pradesh, Rajasthan, and West Bengal managed by AAI. Together, the number of airports in these states account for 58% of the airports under AAI.
Only 13 airports under AAI made profits in 2018-19
In 2018-19, only 13 of the total 113 operational airports made profits according to an RTI response from AAI. The data for 2019-20 is still unavailable. The number of AAI airports that made profits is the least in 2018-19 in a period of 3 years. On the other hand, 100 of 126 airports managed by AAI in 2018-19 reported losses. In other words, 79.3% of the airports under AAI reported losses in 2018-19. Since 2011-12,  the year 2018-19 saw the greatest percentage of AAI managed airports reporting losses.
Total Loss in 2018-19 crossed Rs. 500 crores
In the past eight years, the overall performance of airports under AAI has been wavering up and down with no definitive trend. The AAI airports together reported losses in six of the eight years since 2011-12. The overall loss in 2012-13 was over Rs. 1017 crores, the greatest loss reported in these 8 years.  In 2014-15, the loss reduced to Rs. 597 crores which further dropped to Rs. 240 crores in 2015-16. In 2016-17, an overall profit of Rs.142 crores was reported and in the following year, in 2017-18, a profit of Rs. 599 crores was reported. However, in 2018-19, it was back to losses when the airports together reported a loss of Rs. 544 crores, the worst in four years. In 2017-18, the performance of 28 airports improved while that of 84 airports worsened.
Cumulative performance reveals that only 13 airports made profits in eight years
The cumulative financial performance of these airports between 2011-12 and 2018-19 indicates that only 13 airports made an overall profit in these 8 years. Chennai airport made the most profit with Rs. 3114 crores. It has been consistently making profit of more than Rs. 300 crores in each of these eight years, except in 2018-19. Kolkata made the second highest profit with Rs. 1302 crores followed by Goa with Rs. 650 crores and Pune with Rs. 474 crores. Thiruvananthapuram, Lucknow, and Ahmedabad which have been privatized under PPP have made a cumulative profit in the eight years. Tiruchirappalli too, which is being proposed for PPP privatization, has reported a cumulative profit. Raipur and Varanasi are among those airports proposed for privatization which have reported highest cumulative loss of more than Rs.300 crores.
Performance of the privatized airports has always been better than the majority AAI airports
As noted earlier, Ahmedabad, Thiruvananthapuram, Lucknow, Guwahati, Mangalore, and Jaipur are the six airports that have been privatized till date under PPP. Two of these airports- Mangalore and Thiruvananthapuram are in the south (Kerala and Karnataka), one is in the north (Lucknow -Uttar Pradesh), one in North East (Guwahati – Assam), and two from the west (Ahmedabad -Gujarat and Jaipur – Rajasthan).
Except in 2012-13, Ahmedabad airport has been reporting profits. Its profit rose from Rs. 32 crores in 2013-14 to Rs. 177 crores in 2017-18. In 2018-19, the profit dropped to Rs. 52 crores. Meanwhile, Thiruvananthapuram airport, reported loss in three of the years. However, from a loss of Rs. 23 crores in 2016-17, the profit increased to Rs.142 crores in 2017-18. In 2018-19, the profit dropped to Rs.81 crores. Lucknow airport witnessed profits only in three years between 2015-16 and 2017-18. Guwahati airport had recorded losses up to 2015-16. In 2015-16, a profit of Rs. 8.66 crores was reported which further rose to Rs. 37.09 crores in 2016-17. In 2017-18, the airport reported a loss of Rs. 8.12 crores and in 2018-19, a profit of Rs. 30.59 crores was reported. Jaipur reported a profit only in 2017-18 while in the other years, it has been reporting losses. Similarly, Mangalore airport too reported profits only in 2016-17 (Rs. 34 Lakhs only) and 2018-19.
Government has given multiple reasons for losses
The government has mentioned multiple reasons for the poor financial performance of airports. These include low air traffic movement which has resulted in lesser aeronautical revenue, low non-aeronautical revenue potential, and basic operating expenditure on account of regulatory/IATA and security requirements.
The Government announced various steps that it has been undertaken to overcome these losses such as development of cargo activities, enhancement of non-aeronautical revenue through rate revision, award of contracts through master concessions, and allowing operation of flying schools at non-operational airports. Encouraging maintenance, repair and overhauling activities, revision of base rates, are some of the other measures. The UDAN scheme, introduced by the government with the objective to increase air traffic at these airports, is a step in the right direction.
Under Atmanirbhar package, government will be easing restrictions on Indian Air Space
On top of these mounting losses, the COVID-19 pandemic is set to take a heavy toll on all the aspects of aviation include airport operations. The government has announced easing of air space restrictions in a bid to provide relief to the sector, under the fourth tranche of Atmanirbhar Bharat Abhiyan. The move is expected to bring about a benefit of Rs. 1000 crores for the aviation sector through reduced fuel usage, travel time, and more optimal use of air space. Further, the government also announced that the taxation on maintenance, repair and operations will be rationalized, in order to make India the hub for aircraft maintenance.
Featured Image: Government leasing out Airports