Indian Airport Sector Assessment [Type Here] Capital Fortune Private Limited
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ABSTRACT Amidst increased participation from private players, the Indian Airport sector is set to play a crucial role in the growth of Indian economy. With the new government in place, Indian Infrastructure sector is set to get a major thrust. Airport sector is expected to draw an ever increasing attention of the government. This report captures the major trends, key stakeholders, challenges and future opportunities for the Indian Airport Sector. INDIAN AIRPORT SECTOR ASSESSMENT Capital Fortunes Private Limited (May’14) Indian Airport Sector Assessment [Type here] Capital Fortune Private Limited Contents 1. Overview of the Indian Airport Sector .................................................................................................. 3 1.1. Traffic Trends ................................................................................................................................ 3 1.2. Government Bodies in Airport Sector ........................................................................................... 4 1.2.1. Airport Authority of India (AAI) ............................................................................................. 4 1.2.2. Ministry of Civil Aviation ....................................................................................................... 5 1.3. Regulatory Authorities .................................................................................................................. 5 1.3.1. Airport Economic Regulatory Authority (AERA) .................................................................... 5 1.4. Existing Airports and Airstrips ....................................................................................................... 6 1.5. Greenfield Airports ....................................................................................................................... 6 2. Key Stakeholders in an Airport ............................................................................................................. 8 2.1. Government .................................................................................................................................. 8 2.1.1. Air Traffic Control .................................................................................................................. 8 2.1.2. Tariff Fixation ........................................................................................................................ 9 2.2. Developer ...................................................................................................................................... 9 2.3. Financiers .................................................................................................................................... 10 2.4. Cargo Partners ............................................................................................................................ 11 2.5. Food & Beverage (F&B) Partners ................................................................................................ 12 2.6. Retail and Duty Free Operators .................................................................................................. 12 2.7. Advertising .................................................................................................................................. 14 2.8. Fuel Partner ................................................................................................................................. 14 2.9. Airlines ........................................................................................................................................ 15 3. Revenue Model ................................................................................................................................... 16 4. Privatization ........................................................................................................................................ 19 Karaikal Airport ................................................................................................................................... 20 5. PPP Mode of Development ................................................................................................................. 21 5.1 Benefits of PPP mode of development in Airport Sector ........................................................... 21 5.2 PPPs Success Stories ................................................................................................................... 21 5.3 Constraints in PPP model ............................................................................................................ 22 5.3.1. Supply side constraints ....................................................................................................... 22 5.3.2. Demand side constraints .................................................................................................... 22 5.3.3. Policy Constraints ................................................................................................................ 22 5.3.4. Structural Constraints ......................................................................................................... 23 1 Indian Airport Sector Assessment [Type here] Capital Fortune Private Limited 6. Challenges Faced by the Airport Sector .............................................................................................. 23 7. Future Opportunities .......................................................................................................................... 25 8. Appendix A: Airport wise traffic of Indian Airports (2012-13) ............................................................ 30 9. Appendix B: Airport Projects under PPP Program .............................................................................. 32 10. Appendix C: Operators of major airports across the world ................................................................ 34 11. Appendix D: Skytrax – Global Airport Rankings .................................................................................. 36 12. References .......................................................................................................................................... 39 2 Indian Airport Sector Assessment [Type here] Capital Fortune Private Limited 1. Overview of the Indian Airport Sector India is a huge country, supporting the second highest number of people in the world. In an increasingly globalized economy, air transport is a vital element of the country’s transport infrastructure. Civil Aviation is a key infrastructure sector that facilitates the growth of business, trade and tourism, with significant multiplier effects across the economy. The Indian Airport Sector plays a crucial role in the growth of the country through the last decade. It is now increasingly recognized that aviation, far from being a mere mode of transportation for an elite group, is crucial for sustainable development of economy and trade & tourism. In this context, it is vital that airport infrastructure grows in anticipation of the escalating needs of the air transport industry. The ICAO estimated that $100 spent on air transport produce benefits worth $325 for the economy and 100 additional jobs in air transport result in 610 new economy wide jobs. 1.1. Traffic Trends The passenger and cargo traffic in Indian Airports sector has seen a robust growth in the last decade. The passenger traffic has grown at a CAGR of 14% over the last decade whereas the freight traffic has grown at a CAGR of 8.3%. However, the air traffic declined in the year 2012-13 as compared to 2011-12. This has been majorly due to a fall in the economic activity during this period, poor financial health of the domestic airlines and the closure of Kingfisher Airlines. During the same period, Global passenger traffic increased by 3.1 per cent compared to the year ending March 2012 with international passenger traffic growing by 4.8 per cent and domestic passenger traffic increasing by 1.6 per cent. As per the twelfth five year plan, by the year 2016-17, the passenger traffic is expected to grow to about 269 Million (a CAGR of 14%) and the freight traffic is expected to rise to 4.4 MMTPA (a CAGR of 19%). As per a report by IATA, if Indians begin to travel with the same frequency as Americans, then the years ahead could see the market boom beyond the two billion mark. Passengers 2003-04 2011-12 2012-13 International 16,641,449 40,796,403 43,033,830 Domestic 32,138,162 121,509,019 116,367,526 TOTAL 48,779,611 162,305,422 159,401,356 Freight (in Tonnes) International 693,223 1,467,896 1,406,334 Domestic 375,436 812,091 784,215 TOTAL 1,068,659 2,279,987 2,190,549 Source: Airport Authority of India This growth has come on the back of strong infrastructure addition in the Airport Sector. This is illustrated by the below facts: Scheduled air services available to/from 82 airports (only 50 in early 2000) Enhanced national and international connectivity - 72 foreign airlines are operating to/from various destinations Bilaterals with 104 countries 1356 International flights utilizing 3,26,705 seats per week 3 Indian carriers are operating 990 flights to 35 destinations in 25 countries North East Connectivity: 87 flt/wk to 286 flt/wk in 5 years (230% increase). 3 Indian Airport Sector Assessment [Type here] Capital Fortune Private Limited As per the Twelfth Five year plan, the passenger handling capacity in India has risen to 220 million in FY 2011. During the same period the cargo handling capacity also has risen