INDUSTRY OUTLOOK AIRPORT INTRODUCTION The primary responsibility for the development and management of Indian airports has been with the Gov- ernment of India (GoI) through the Ministry of Civil Aviation (MoCA)-controlled Airports Authority of India (AAI).During the last decade, the Indian aviation industry reported healthy growth following liberali- sation of the airlines industry, advent of low-cost carriers, competition-induced decline in travel costs etc¹. CAPITAL MARKET SIZE EXPENDITURE The international and domestic aircraft movements have witnessed an (Capex) PLANS increase of 9.5 per cent and 13.9 per cent respectively resulting into 13.0 percent increase in total aircraft movements during Airports Authority of India (AAI) (April- February) 2017-18 has chalked out a programme for as compared to upgradation of airports with an (April- February) 2016-17; expenditure of Rs 18,000 crore in whereas the international the next four years³. and domestic passengers The capital expenditure is project- traffic have shown an edto be around Rs 4,100 crore for increase of 10.1% and 2018-19. 17.4 % respectively resulting into overall increase of 15.8 % in total passenger traffic during the period (April- February) 2017-18 as compared to (April- February) 2016-17. Further, the international and domestic freight traffic have shown growth of 17.2 % and 8.0 % respectively resulting into overall increase of 13.7 % in total freight traffic during the period (April- February) 2017-18 as compared to (April- February) 2016-17². REGIONAL CONNECTIVITY SCHEME Last Year, Regional connectivity scheme of UDAN (Ude Services, Turbo Aviation, Zoom Air and Pinnacle Desh ka Aam Nagrik) initiated by the Government of are some of the new private players. India (GoI) shall connect 56 unserved airports and 31 unserved helipads across the country. UDAN is the The Union Budget 2018 stated that the Airport Government’s initiative to make air travel to India’s tier Authority of India (AAI) has 124 airports and II and tier III cities affordable to the common people by proposed to expand airport capacity more than placing/connecting smaller cities and remote regions five times to handle a billion trips a year under a on the aviation map. Under the scheme, the Govern- new initiative- NABH Nirman; this expansion will ment offers incentives to airlines to flag off new flights be funded by leveraging the balance sheet of to neglected smaller cities and towns by providing Airport Authority of India (AAI). The AAI is likely to Viability Gap Funding (VGF) to make these operations invest INR 15,000 Crore in FY2018-19 to expand profitable. Airlines are required to bid for exclusive existing terminal buildings as well as construct new rights to fly on the regional routes opened up under the buildings. scheme. Heritage Aviation, Maritime Energy Heli Air the State Civil Aviation Department, while another Rs. 1500 crore will be provided by the Noida Devel- opment Authority. An amount of Rs. 500 crore each, shall be shared by Greater Noida Authority and Yamuna Expressway Industrial Development Author- ity (YEIDA) respectively. Around 1441 hectares have been identified in the first phase of the project. The airport is expected to start operation in The international and domestic aircraft movements have witnessed an 2022-23, with an initial capacity of 60 lakh passen- increase of 9.5 per cent and 13.9 per cent respectively resulting into gers. The airport is expected to have 4 runways (2 in 13.0 percent increase in total aircraft movements during 1st phase; 2 in 2nd phase) to cater over 300 million (April- February) 2017-18 passengers. Site clearance for the project was grant- as compared to ed by the Ministry of Civil Aviation (MoCA) on July (April- February) 2016-17; 6, 2017, and the Uttar Pradesh Government whereas the international RECENT DEVELOPMENTS appointed Yamuna Expressway Industrial Develop- and domestic passengers ment Authority (YEIDA) as the implementing agency traffic have shown an • An airport at international level, that will be locat- on its behalf in October 2017. Jewar used to be a increase of 10.1% and ed at Jewar in the northern state of Uttar Pradesh and part of the Bulandshahr district but now is a Nagar 17.4 % respectively resulting into overall increase of 15.8 % in total 72km from the Delhi Indira Gandhi International Panchayat in the Gautam Buddha Nagar district. passenger traffic during the period (April- February) 2017-18 as airport, to "decongest" Delhi airport, got approval The area with a population of 32,000. YEIDA has compared to (April- February) 2016-17. Further, the international and recently to be built under the Public Private Partner- identified nine villages which have to be acquired ship model (PPP); estimated to spread over 3,000 for the airport; however, land acquisition issue is hectares of land. The Uttar Pradesh government is likely to be less prominent provided farmers receive likely to spend Rs. 4000 crore for land acquisition for adequate compensation. the Noida international Greenfield airport near Jewar. Out of this amount, Rs.1500 will be spent by • On 26 February 2018, Jammu-Bhatinda flight service began from Jammu airport under Ude Desh ka Aam Nagrik(UDAN) regional connectivity scheme. Jharsuguda airport in western Odisha has been completed at INR 200 crore. Foundation stone of Navi Mumbai airport is underway; where the City and Industrial Development Corporation of Maharashtra (CIDCO) is facing an arduous task of relocating project affected persons and flattening the Ulwe hill and diverting Ulwe river; hill operation and rehabilitation of local habitants also got delayed due to monsoon challenges. MAJOR PLAYERS assumption that the transaction takes place on or before December 1, 2018. GMR Hyderabad Inter- national Airport Limited (GHAIL) has a concession GMR Infrastructure Ltd period of 60 years starting March 2008. The infra- structure company is in the process of taking up GMR Airports Ltd, a subsidiary of GMR Infrastructure Airports Authority of India (AAI) expansion of the Hyderabad airport with an outlay Ltd and part of GMR Group, has entered into an has chalked out a programme for of over Rs.2,500 crore. It has recently raised $350 agreement with Malaysia Airports Holdings Berhard upgradation of airports with an million by offer of bonds for expansion and repay- (MAHB) to acquire the 11 per cent stake that the expenditure of Rs 18,000 crore in ment of older debt. However, possibility of further latter holds in GMR Hyderabad International Airport the next four years³. financial leverage due to expansion might pose a Thefor capital Rs.484 expenditure crore (about is projected$ 76 million). In a regulatory challenge. to filingbe around made Rs to 4,100 exchange, crore forGMR had informed it will 2018-19.acquire 4.15 crore shares of ₹10 each from MAHB, equivalent to 11 per cent equity in the airport, sub- GVK Power & Infrastructure Ltd ject to regulatory approvals. Thus far, GMR held 63 per cent equity stake through its airports arm and Mumbai International Airport (MIAL) operator GVK with the acquisition of 11 per cent stake from MAHB Power and Infrastructure is building Mumbai's second it goes up to 74 per cent. Of the remaining stake, airport and will raise up to $1b by issuing dollar while the Airports Authority of India holds 13 per bonds to fund the Greenfield project and refinance cent, the balance stake of 13 per cent is with the existing debt. The proposed overseas securities would Telangana government. As per the transaction be of "144A" nature, where institutional buyers across arrangement, the price is based on the Asia, Europe and the US can invest. The bonds may have five-ten year maturities. Going by the latest tra, owns the rest. GVK's total debt was about Rs market trend, the bonds may offer coupons in the 5,811 crore as on March 31, 2017, which was 5% range of 5-10% as the company is rated below less a year earlier, show data from Bloomberg. Total investment grade. The company has to seek a fresh debt was Rs 22,464 crore three years ago. During re-rating for its proposed offshore bond-sale, which the July-September quarter, GVK reported a net loss could be marked as high-yield by any global rating of Rs 77 crore. Recently GVK also expressed interest company. Since GVK is burdened with debt, GVK will in running the Airport Authority of India’s Ahmedabad raise money either to refinance or fund new projects. and Jaipur airports; GVK has submitted bids for In October last year, the Maharashtra government taking over maintenance and operations of the two approved GVK's bid for the Rs 16,000-crore Navi profit-making airports belonging to the Airport Mumbai airport project. A special purpose vehicle Authority of India (AAI). While Ahmedabad handles (subsidiary), Navi Mumbai International Airport Pvt 8.42 million passengers annually, Jaipur currently Ltd, is building the airport. GVK holds about caters to 4.34 million tourists each year. three-fourths ownership in the company while City and Industrial Development Corporation (CIDCO), the nodal authority of the government of Maharash FUTURE OUTLOOK • In December 2017, the International Air Transport Association (IATA) increased its estimates for 2018 industry net profit to $38.4 billion. Passenger numbers are expected to increase to 4.3 billion in 2018. • India is poised to become the third largest civil aviation market by 2020 and the largest by 2030. Freight traffic on airports in India is expected to cross 11.4 million tonnes by 2032. Growth in import and export in India will be the key driver for growth in freight traffic as 30 per cent of total trade is undertaken via airways.