Sitting on Rs 1 trn in assets, pvt airports want cash support from govt

Experts say the demands of airports controlled by big corporate groups sitting on piles of cash are unlikely to be entertained by the Modi govt

In July 2021, former Indian army chief and minister of state for civil aviation (Retd) General V K Singh gave some grim numbers to the Parliament. Most Indian airports in India were running into losses. According to Singh’s figures, private airport operators, including GMR, Adani and Fairfax, which control the largest and most lucrative airports in the country were beset with cumulative losses of over Rs 1,500 crore in 2020-21.

Fairfax-controlled Bengaluru airport (which also was the busiest during the pandemic in 2020) was the worst-hit, posting a loss of about Rs 500 crore in 2020 according to its financial statements. The six airports controlled by the $56-billion-worth Adani group posted losses of Rs 350 crore. GMR-controlled Delhi and Hyderabad airports posted losses similar to Adani's. Kolkata and Chennai, the other two big airports under management of the Airports Authority of India (AAI) lost Rs 31 crore and Rs 254 crore, respectively. Centre for Aviation (CAPA) in a report estimated that all Indian airports had lost Rs 7,000 crore on account of a 78 per cent fall in domestic and international traffic due to Covid-19 induced restrictions.

Not surprisingly a couple of months earlier in May, the Association of Private Airport Operators (APAO) which counts 11 private airports as its members, was knocking on the Modi government’s door asking for ‘cash support’ to sustain operations and tide over the losses of 2020-21 and the uncertainties that lay ahead.  APAO’s biggest members are Adani and GMR, who directly control or are in a public-private partnership in eight of these airports.

From May to July, they demanded three things from the government - allow them to not repay their bank loans along with interest till June 2022, restructure their loan accounts which may have become ‘stressed’ due to Covid and relaxing profitability guidelines that require a company to have shown a minimum of three years of continuous profit to invest  overseas.  

“There has been no response on our demands till now from the government. There are other ways in which the government can help us. They have also helped airlines that have been hit by Covid by raising caps on fares and other measures,” said Satyan Nayar, secretary general of APAO. It must be noted that the government provided Rs 128 crore and Rs 26 crore in 2020-21 to Ajay Singh-owned Spicejet and Ness Wadia’s GoAir (now GoFirst) as emergency credit.

Private airport operators also asked for monetary support to pay salaries of their airport staff and not to be put under insolvency and bankruptcy proceedings till 2022. Other demands included reduction in goods and services tax (GST) from 18 per cent to 12 per cent, access to working capital loans without any collateral or obligations to repay these loans for at least two years and repayment of dues owed to their airports by Air India. Additionally, they have also asked for measures like doubling the sale limit of duty-free liquor to four litres to boost their non-aeronautical revenue.

"Despite uncertainties and their financials, airport operators are unlikely to get any cash support or major concessions from the government. Given the situation, the Indian government has other social sector priorities and burning issues to deal with to kickstart the Indian economy which has been adversely impacted by the pandemic. While the aviation industry and airport operators are key for the revival of the economy, they do not figure on the top of the list of sectors which need immediate attention at the moment,” said Vinamra Lognani, head of operations at aviation law firm Sarin & Co.  

Take the case of GMR which has a concession agreement with AAI to run the Delhi airport in addition to partnerships with other state governments to run Cochin, Goa and Hyderabad. 72 per cent of GMR Infrastructure’s business is contributed by its domestic and global airports business. The rest primarily comes from power stations and highway concessions. Though running losses of over Rs 3,000 crore over the last three years, GMR infrastructure has cash reserves of over Rs 4,000 crore and assets valued at around Rs 50,000 crore. The group has been in the debt doldrums for a bit with financing expenses taking a toll on its profitability. It has been trying to reduce its debt by hiving off assets. One of the recent ones was selling its stake in the Paris airport for Rs 9,813 crore. Much of that money may well go to repaying its debts. A GMR spokesman refused to comment on the group’s request for cash assistance from the government and insisted that APAO might be better suited to answer the queries. APAO’s president is Gautam Adani’s son Jeet Adani.

The Adani group, which recently won bids for six airports in addition to acquiring a majority stake from GVK in the Mumbai airport, has had a dream run over the last few years. Like GMR, Adani is fuelling its expansion by borrowing heavily. Adani Enterprises’ cash reserves are just a fraction of GMR’s and its assets just half of the Hyderabad based group. But it is a highly profitable business with revenues and profits of over Rs 40,000 crore and Rs 1,100 crore, respectively, in 2020-21. Most listed Adani companies have had a phenomenal run on the stock markets in recent times and its chairman’s wealth grew more than that of any other human on the planet over the past year. The Adani group has been lucky in its airport business while other private operators were being pummelled by the pandemic.

Adani formally took over operations of Mumbai airport – the jewel in its crown – only in July 2021. The pandemic’s course remains uncertain, but most airports bore the full force of travel shutdowns in 2020 with things easing gradually domestically and internationally towards the end of last year. The group was supposed to take over the Ahmedabad airport on August 13, 2020; 180 days after signing the deal. In August 2020, Adani expressed its inability to take over the airport citing Covid-19 induced disruptions and requested for an extension of 205 days. AAI gave Adani a three-month extension and the Ahmedabad airport was formally handed over to the group on November 7, 2020. It has also got an extension for taking over the Thiruvananthapuram airport in Kerala due to the same reasons.  

Fairfax, the majority shareholder of a single but crucial airport, Bengaluru, faces a similar dilemma. Fairfax India Holdings has varying stakes in various Indian companies, apart from its 54 per cent stake in Bengaluru airport, which it acquired for $653 million in 2018. It has stakes in India Infoline (IIFL), 5paisa, Fairchem, Catholic Syrian Bank among others in the country. The valuation of all these shares has increased manifold as the Indian stock markets boomed during the pandemic months and continue to be on the bull run. A set of questions sent to the Adani group and Fairfax did not elicit a response till the time of publication.

Private airports have received extensions in payments of dues as per their concession agreements, loan moratoriums as announced in Covid relief packages by the government and other tax benefits over the last year.

Lognani said, "All businesses hit by Covid are within their full rights to seek assistance from their governments. They may be big corporates, but as airport operators they are individual entities that are encountering financial troubles. There is still a great deal of uncertainty over the future. Countries with high vaccination rates like the US are seeing breakthrough infections and surge of cases. Should there be a variant that the current set of vaccines do not work on, we may be looking at another strict lockdown. Airport operators would be again severely hit in that case.”

While the Modi government did extend an emergency credit line to Spicejet and GoAir, no such announcements for private airport operators have yet been made. That’s because the Modi government realises that the future may be uncertain, but for these corporate airports, the end is certainly not near.