Explained: Why there is no rush for new greenfield airport in Jewar

On July 15, prospective bidders for the new greenfield airport in Jewar, in Uttar Pradesh, have been called for a pre-bid meeting to clarify their doubts. The airport, to be built in public-private partnership mode, is being positioned as an alternative for citizens in the National Capital Territory, including the neighbouring cities of Mathura, Meerut, Ghaziabad, Gautam Budh Nagar, among others, which have till now had just one choice for an airport — the Delhi airport with its three terminals, around 80 km from Jewar.
 
But with burgeoning traffic in Delhi and just three runways, it is already facing capacity constraints — especially during peak hours. In FY19, the airport handled around 70 million passengers.
 
The Noida International Airport Ltd (NIAL), which is overseeing the project, had initially pitched for completion of the airport by April 2023, based on the deadline suggested by Price Waterhouse Coopers (PwC), which conducted the techno-economic survey for the project. But most government officials now believe this deadline will have to be pushed to 2024 as acquisition of land is still a work in progress. Besides, the earlier deadline of having a financial closure of the project by 31 March 2019 is long gone. NIAL, however, is moving quickly. It wants to close the bids by November and award the project by January 2020.
 
The question which potential infrastructure players who are interested in bidding are grappling with is whether Jewar would be a viable business proposal in 2024. Many say that the airport should be built only after the large capacity increase being undertaken at the Delhi airport is absorbed. A top executive of an airport infrastructure company says: “There is no second guessing whether Delhi needs a second airport or not. But the issue is whether it should be operational by 2024 or at least three to five years later, when there is sufficient demand due to Delhi airport exhausting its expanded capacity too. Otherwise, the substantial investment made will remain idle. So what is the hurry?"

He has a point. The Delhi International Airport Limited (DIAL) has embarked upon a massive expansion to increase its capacity from 70 million passengers per annum to 130 million (both arrivals and departures together). And based on their submissions to the government, they say that this is enough to take care of the passenger traffic from Delhi and the adjoining areas till 2034. That is based on the fact that the annual passenger growth in the last five years in Delhi has been 10-11 per cent per annum, and it is expected to slow down as the passenger base increases.
 
So what is DIAL offering? According to sources, DIAL, which has started implementing the first phase of expansion, will see passenger capacity rise from 70 million to 100 million per annum by March 2021. The airport is putting up a fourth runway and expanding terminal ID, besides building a cross taxiway. This will increase the number of slots available for departure and arrival at peak times. In the next phase, a fourth terminal will be built, taking the capacity to 116 million passengers, and further to 130 million per annum after a few tweaks in operating procedures.
 
If this plan holds good then who does Jewar serve? Based on the Request for Proposal (RFP), the first phase of the Jewar airport would have a capacity of 12 million passengers per annum, going up to 70 million by 2039. The cost for the first phase, according to NIAL, is Rs 4,588 crore.
 
PwC, which prepared the feasibility report on behalf of the authority, clearly thinks Jewar airport is viable. It expects that in the initial period the spillover traffic at peak hours in Delhi (because slots will not be available) will shift to Jewar and it will be able to garner 4.9 million passengers in the first year, going up to 14 million by 2029. It estimates that by 2029-30 the spillover traffic will pick up significantly as Delhi reaches capacity.
 
For a substantial number of passengers coming from the hinterland, PwC says, Jewar will be the closest airport. Based on their research of passenger profiles at the Delhi airport, currently 57 per cent of the passengers come from NCT of Delhi and 11 to 12 per cent are from the districts in Uttar Pradesh like Gautam Budh Nagar, Ghaziabad and Agra. Also, 18 per cent of the international travellers to Delhi visit Agra and 60 per cent of them want an international airport near to the destination. It also says that by 2029-30, the demand for air travel from the hinterland will hit 115 million per annum, and a large number of these passengers will go via Jewar.

Even airlines, especially the budget ones, see an opportunity in offering differential pricing to customers taking a flight from Jewar compared to Delhi during peak hours. But they admit they will require enough customers from the catchment area to provide them with a decent passenger load factor before they can decide to fly on specific routes. 
 
What makes the debate interesting is that the airport is less than 150 kilometres away from Delhi. So DIAL, according to the rules, would get a limited first right of refusal to build the airport. In simple terms, it means that if the number that it quotes for revenue per passenger (bidding is based now on this formula rather than the older system of revenue share) is within 10 per cent of the highest bidder, it will be given a chance to match that bid.
 
If it wins, the question to ask is: How will it fit in with its expansion of Delhi, which is going full-on? If it doesn’t win, what would be interesting to see is the strategy of a new player to make Jewar a worthwhile business model. Or, will both prefer to see the project take off commercially much later on?