The government’s intention to monetize at least 25 more airports, including Chennai, Varanasi, Coimbatore, Nagpur and Bhubaneswar, between 2022 and 2025 is discussed in the Economic Survey 2021-22. This means that by 2025, at least 36 airports including Delhi, Mumbai, Navi Mumbai, Thiruvananthapuram, Lucknow and Chennai will be out of the purview of the government. It would also mean that the Airports Authority of India (AAI) would be left with largely loss-making airports, or it would have to develop virgin airports for the government’s regional air connectivity scheme.
The government’s decision has come at a time when AAI’s profits are falling. In 2020-21, it reported profit after tax of 1,985.09 crore, below 2,271.14 crore in the previous year. AAI’s income, most of which comes from its revenue share in Delhi and Mumbai airports, is channeled back into airport development. The National Council of Applied Economic Research predicted in April 2021 that Delhi and Mumbai would originate from 23,330 crore in revenue between 2019-20 and 2023-24 for AAI.
With the latest announcement of monetization of at least 25 new airports, the government has a narrow window of opportunity to act and ensure that it is able to get meaningful funding from AAI’s monetization.
This is necessary as AAI is fast approaching the position of Air India where the government was left with no option but to sell it to the highest bidder, Tata. The government had to allocate an additional 51,971 crore for settlement of outstanding guaranteed liabilities of Air India and its other “miscellaneous commitments” in the Union Budget 2022-23.
Since privatization of AAI does not seem to be a very viable option, a viable solution may be corporatisation of state-owned airport developer and operator.
If this route is followed, AAI will be free from government interference, have operational flexibility, and can issue bonds, or raise loans from non-financial institutions – things that it does not form an authority. can do After incorporation, AAI can run as a professional organization with transparency and can leverage its other core strengths like trained manpower. It can also generate non-aeronautical revenue by allowing hotels, convention centers and shopping malls, which the GMR Group has done very successfully, having won the mandate to modernize the Delhi airport.
The idea of incorporation of AAI is not new. As recently as 2014, Ashok Gajapathi Raju, who was the civil aviation minister in the first term of the Narendra Modi government, had announced plans to privatize AAI to improve transparency and bring in better efficiency. He did not set a time limit for this proposal; Possibly, the time has come to implement it, and procrastination may be a missed opportunity.
However this task is not going to be easy. AAI has massive loss-making airports; Therefore, if it has to become a viable corporate entity, it needs to strengthen its core skills first. The government should allow AAI to successfully operate and manage airports in India and also encourage it to look at airports abroad. AAI has built airports in countries such as Libya, although it has not managed and operated them. Once this is achieved and AAI is successfully recognized as one of the region’s top airport operators and managers, it will be easier to incorporate.
The crucial question is whether the government will act in time, or, like Air India, wait until it becomes impossible for it to handle another loss-making entity.
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