Airports' non-aviation revenue set to take-off

Non-aeronautical revenues are set to bloat the purses of airports being developed by the private sector.

Private players are setting up malls, hospitality chains, book shops, duty-free shops, Internet cafes, lounges and entertainment centres at greenfield airports as well as those they are upgrading. This is expected to contribute almost 50 per cent to their revenue.

"Airports, including those operated by the government, are targeting an average 50:50 mix. Airline passengers are expected to increase from 39 million in 2000-01 to 77 million in 2006-07 and cargo hauled is expected to increase from 0.8 million tonnes to 1.40 million tonnes during the same period," industry analysts said.

"Also, the proposed growth in airline fleet size from 271 to 482 will warrant the need for improved and increased airport facilities. Non-aeronautical revenue is a niche area with huge potential for exploring revenue enhancement because the rates are not regulated," says a KPMG study.

For instance, Cochin International Airport has earmarked 480 acres on the city side of the airport for commercial use. "The Rs 3,500 crore land utilisation plan has been finalised for maximising non-aeronautical revenue. The airport city concept is expected to be completed in 5-7 years," said Cochin International Airport Managing Director Sriram Bharat.

The land utilisation plan envisages a world-class aircraft maintenance facility, an aviation academy, an 18-hole golf course, an infotech park, 5 and 3-star hotels, a convention centre, an exhibition hall, a logistics centre, shopping malls and family entertainment facilities.

Mumbai International Airport Managing Director Sanjay Reddy said Mumbai airport was targeting 55 per cent of its revenue from the non-aeronautical segment by setting up retail outlets, hotels, advertisements and parking slots.

GMR-DIAL, the GMR-led joint venture company managing Delhi Airport, proposes to develop a world-class aerotropolis on 250 acres of land around the airport for commercial activities. It proposes to invite some of the country's leading real estate developers to set up facilities for business and casual travellers.

"Typically, an aerotropolis will have business centres, convention halls, hotels, malls and even a golf course. The concept of an aerotropolis is now a global phenomenon. Dubai, Amsterdam, and Bangkok have successfully developed aerotropolises around airports," said a Delhi Airport executive.

Greenfield airports such as Bangalore International Airport and Hyderabad International Airport are also implementing similar concepts. Besides private players, the government has also identified non-aeronautical revenue as an important option to turn around loss-making airports.

"The increase in non-traffic revenue has helped in reducing losses by 10-15 per cent for loss-making airports. Out of the total 126 airports and civil enclaves across the country, only nine make profit," said a civil aviation ministry official.

The profitable airports include Mumbai, New Delhi, Bangalore Civil Enclave, Kozhikode, Juhu Civil Enclave, Pune Civil Enclave, Chennai and Kolkata.

As a part of modernising 35 non-metropolitan airports, the Airports Authority of India has appointed five groups of global technical advisers and Indian financial consultants to develop a land use plan for these airports to boost non-aeronautical revenues.

"The government has also taken a series of steps to enhance non-aeronautical activities at loss-making airports across the country. Introducing fast-food outlets, advertisement on balloons, Wi-Fi services, licensing of plasma TV display, setting up duty-free shops and privatisation of money exchange counters are some of them," the government official added.