Ruth Haines
India's civil aviation sector has been experiencing rapid growth, with the country aiming to become the third largest aviation market globally by 2025. To meet this goal, the government has initiated a large-scale project to upgrade existing airports and build new ones, with the bulk of the expected expenditure to be contributed by the private sector. This has resulted in a shift towards airport privatisation, with the first airports privatised being those in Delhi and Mumbai in 2006. As of 2024, the Adani Group operates six international airports in India, with plans to expand further by acquiring more airports through privatisation. The Indian government also has plans to privatise 30 to 35 airports owned by the Airports Authority of India (AAI) by 2025.
| Characteristics | Values |
|---|---|
| Airports privatised in 2006 | Delhi and Mumbai |
| Airports privatised in 2019 | Trivandrum (TRV), Mangaluru (IXE), Ahmedabad (AMD), Jaipur (JAI), Lucknow (LKO), and Guwahati (GAU) |
| Airports to be privatised by 2025 | 30-35 airports |
| Private investment goal by 2024 | Rs 3,660 crore |
| Airports to be privatised in the second round of auctions | Bhubaneshwar, Varanasi, Amritsar, Trichy, and more |
| Airports under consideration for privatisation | Chennai, Kolkata |
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What You'll Learn
Airports privatised in India: Delhi, Mumbai, Bangalore, Hyderabad
Several airports in India are privatised, including those in major cities like Delhi, Mumbai, Bangalore, and Hyderabad. Here is some information about the privatisation of these airports:
Delhi
Delhi's airport, officially known as the Indira Gandhi International Airport (IGI), is one of the busiest airports in India and Asia. While the airport is operated by a private entity, the Delhi International Airport Limited (DIAL), the ownership structure is a public-private partnership. The GMR Group, a private infrastructure company, leads a consortium that holds a majority stake in DIAL, with the Airports Authority of India (AAI) and the Government of India also having stakes.
Mumbai
The Chhatrapati Shivaji Maharaj International Airport in Mumbai is the second busiest airport in India and is operated by Mumbai International Airport Limited (MIAL). MIAL is a joint venture between Adani Enterprises, a subsidiary of the Adani Group, and the Airports Authority of India (AAI). The Adani Group holds a majority 74% stake, while the AAI controls the remaining stake.
Bangalore
Bangalore's Kempegowda International Airport is owned and operated by Bengaluru International Airport Limited (BIAL), a public-private consortium. It was developed to replace the congested HAL Airport, which previously served the city. BIAL includes stakeholders such as the Tata Group, Raytheon, Singapore Changi Airport, and the Government of Karnataka.
Hyderabad
The Rajiv Gandhi International Airport in Hyderabad is owned and operated by GMR Hyderabad International Airport Limited (GHIAL), a public-private venture. The GMR Group, a private firm, holds a majority stake, while the Airports Authority of India (AAI) and the Government of Telangana each have a 13% stake. The airport is known for its cargo facilities, including a temperature-controlled Pharma Zone for storing pharmaceuticals.
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Adani Group's role in privatisation
India has witnessed a trend towards the privatisation of its civil aviation sector, with the government aiming to privatise 30 to 35 airports owned by the Airport Authority of India (AAI) through public-private partnerships (PPP) by 2025.
The Adani Group has been a significant player in this privatisation process, with a focus on expanding its aviation business. As of 2023, the group owns and operates seven airports in India, six of which have been acquired through the government's privatisation drive. These include Lucknow, Ahmedabad, Mangaluru, Thiruvananthapuram, and Guwahati, which were privatised in 2020, along with Mumbai International Airport, which the Adani Group took over from GVK in July 2021.
The Adani Group's acquisition of these airports has not been without controversy. The group has faced litigation and accusations of favourable rule changes from the government. In February 2019, a public interest litigation (PIL) was filed against the privatisation of the Guwahati airport, and employees protested when asked to vacate their staff quarters. The Kerala government also opposed the privatisation of the Thiruvananthapuram airport, with the legislative assembly passing a unanimous resolution in August 2020. Additionally, there have been concerns about the Adani Group's lack of prior experience in airport management, with the Finance Ministry suggesting that no more than two airports should be awarded to a single bidder.
Despite these controversies, the Adani Group remains committed to expanding its airport business in India. Arun Bansal, CEO of Adani Airports, has expressed the group's ambition to bid for more government-run airports as they come up for privatisation. The group is currently building a new airport in Navi Mumbai and plans to bid for more airports if the conditions are right.
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Airports Authority of India (AAI)
The Airports Authority of India (AAI) is a statutory body under the ownership of the Ministry of Civil Aviation, Government of India. It was formed on 1 April 1995 by merging the International Airports Authority of India (IAAI) and the National Airports Authority (NAAI). The IAAI was set up in 1972 to manage India's international airports, while the NAAI was formed in 1986 to oversee domestic airports.
The AAI is responsible for creating, upgrading, maintaining, and managing civil aviation infrastructure in India. This includes the design, development, operation, and maintenance of international and domestic airports, as well as the control and management of Indian airspace. It also provides Communication Navigation Surveillance/Air Traffic Management (CNS/ATM) services over the Indian airspace and adjoining oceanic areas.
In addition, the AAI undertakes flight calibration of navigational aids for the Indian Air Force, Indian Navy, Indian Coast Guard, and other private airfields in the country. The Eastern region of the AAI controls 20 airports (including 12 non-operational airports) and four aeronautical communications stations.
The AAI also focuses on the safety of passengers at the airports it runs. Its Rescue and Fire Services are highly trained and prepared to provide fire protection and rescue services at all times. There is also an airport emergency plan in place to coordinate the efforts of mutual aid agencies within the airport and its vicinity.
The AAI has been criticised for awarding a large number of sub-optimal service contracts. There are also concerns that with the privatisation of profitable airports, the AAI will be left with only economically unviable airports. Despite this, the AAI has generated revenue through auctions, which can be used to construct airport infrastructure in underdeveloped areas.
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Public-private-partnership (PPP) model
The Government of India has been developing new airports and modernizing existing ones in several cities through public-private partnerships (PPP). In 2020, the government conducted an auction to privatize six airports: Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, and Guwahati. In the second round of auctions, the government decided to privatize 13 more airports, aiming for private investment of Rs 3,660 crore by 2024. The government's vision is to privatize 30 to 35 airports owned by the Airport Authority of India (AAI) by 2025.
The PPP model in airport infrastructure brings efficiency in service delivery, expertise, enterprise, and professionalism, in addition to attracting the necessary investments in the public sector. The Airports Council International (ACI) has ranked PPP airports in India among the top 5 in their respective categories in terms of Airport Service Quality (ASQ).
Under the PPP model, the private party is responsible for the operations and management of existing airport assets, as well as designing, engineering, financing, constructing, and developing additional infrastructure. The AAI has adopted a per-passenger fee model, modifying the previous revenue-sharing model used in the privatization of airports in Delhi, Mumbai, Bangalore, and Hyderabad.
There are different models for airport PPPs. One is the concession arrangement, where the private operator pays a fee to the contracting public authority and recovers costs through various charges to airport users. This shifts revenue and demand risks to the private operator. Another model is the availability model, where the government makes regular payments to the private contractor based on the availability of airport facilities. This is used when the demand or revenue risk is perceived as too high, such as during the initial phases of a new airport in a developing country.
A key issue in airport PPPs is regulating airport charges. Airports occupy a natural monopoly position, so normal market forces have limited effect on setting charges. Balancing accessibility for the public at a reasonable cost while protecting the airport's profit margins can be challenging. The private developer's flexibility in setting and collecting tariffs significantly impacts the level of revenue and demand risk they are willing to assume.
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Opposition to privatisation
Opposition to the privatisation of airports in India has come from several quarters, including major airlines and the International Air Transport Association (IATA). One of the primary concerns is the potential increase in operational costs for carriers due to higher tariffs imposed by private companies operating the airports. This could exacerbate the financial challenges faced by airlines, particularly in light of the support they require to navigate the ongoing financial difficulties brought on by the COVID-19 pandemic.
The complexities of the tendering process and bureaucratic impediments have also been cited as challenges that could hinder the privatisation process and cause delays. Additionally, there is a concern that the privatisation of profit-making airports will leave the Airport Authority of India (AAI) with only economically unviable airports. This could result in the AAI being saddled with airports that are a financial burden, impacting their ability to develop and modernise airport facilities across the country.
Another argument against privatisation is that it may not be the panacea for the challenges facing civil airports in India. The government has been advised to consider alternative approaches that do not involve relinquishing control of airports to private entities. Furthermore, there is a lack of clarity regarding the degree of risk transfer to private players in critical areas such as asset condition, construction cost, operational risk, and non-insurable risks.
Additionally, some have argued that only the public sector can provide good facilities at airports at affordable costs. They contend that privatisation could lead to higher costs for passengers and airlines alike, impacting the accessibility and affordability of air travel in India.
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Frequently asked questions
The first Indian airports to be privatised were the two largest airports in the country, Delhi and Mumbai, in 2006.
As of 2024, the Adani Group operates airports in Trivandrum, Mangaluru, Ahmedabad, Jaipur, Lucknow, and Guwahati. The group also operates Mumbai airport, which it took over in 2021.
Yes, the Indian government has been working to privatise 30 to 35 airports owned by the AAI by 2025. In 2020, the government conducted an auction to privatise 6 more airports: Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, and Guwahati. The second round of auctions included 13 airports: Bhubaneshwar, Varanasi, Amritsar, and Trichy, among others.
