Private Operators Expected to Invest ₹8,622 Crore in 11 AAI Airports Proposed for Lease

Private concessionaires are expected to invest approximately ₹8,622 crore across 11 Airports Authority of India (AAI) airports that have been proposed for lease in five distinct bundles. Documents reviewed by businessline detail the planned investments and projected returns for the infrastructure projects.

The Public Private Partnership Appraisal Committee (PPPAC) granted in-principle approval to the five bundled concessions. The five designated bundles comprise Amritsar-Kangra, Varanasi-Gaya-Kushinagar, Bhubaneswar-Hubballi, Raipur-Aurangabad, and Tiruchirappalli-Tirupati.

Following this approval, the Ministry of Civil Aviation (MoCA) will conduct market sounding with potential infrastructure players. Feedback gathered from these interactions will be incorporated into the proposal before it is submitted to the PPPAC for a final recommendation.

Investment requirements vary across the bundles. The Bhubaneswar-Hubballi bundle holds the highest estimated investment requirement at ₹2,725 crore, closely followed by Varanasi-Gaya-Kushinagar at ₹2,467 crore. Raipur-Aurangabad requires an estimated ₹1,496 crore, while Tiruchirappalli-Tirupati and Amritsar-Kangra have estimated requirements of ₹1,411 crore and ₹523 crore respectively.

In terms of financial projections, the Centre has estimated equity returns of up to 18.6 per cent for the five airport bundles. The Varanasi-Gaya-Kushinagar bundle projects the highest equity internal rate of return (EIRR) at 18.6 per cent, with its project internal rate of return (PIRR) estimated at 12 per cent. The EIRR for Amritsar-Kangra stands at 17.5 per cent with an 11.5 per cent PIRR, while Tiruchirappalli-Tirupati projects an EIRR of 16.7 per cent and a PIRR of 10.7 per cent. Additionally, Bhubaneswar-Hubballi projects a 16.4 per cent EIRR and an 11.9 per cent PIRR, and Raipur-Aurangabad outlines an EIRR of 16.7 per cent alongside an 11.6 per cent PIRR.

To enhance the financial viability of these bundles, the proposed concession structure includes making city-side land available to private concessionaires. The specific portion of land, along with the permissible scope and nature of city-side development, will be detailed in upcoming bid documents and the Draft Concession Agreement.

The revenue framework outlined in the documents identifies three primary revenue streams: aeronautical, non-aeronautical, and city-side development revenues. Aeronautical revenue sources include landing, housing, and parking charges, cargo, ground handling, fuel throughput, and User Development Fees. Non-aeronautical streams encompass duty-free retail, food and beverage outlets, car parking, car rentals, advertising, and miscellaneous services. City-side development, including real estate, represents an additional designated revenue source.

The five-bundle structure was formulated following a comprehensive assessment by AAI. Initially, AAI evaluated 12 major airports based on passenger traffic, land availability, commercial potential, financial performance, and specific operational strengths and constraints. Subsequently, the authority reviewed 136 smaller airports for potential bundling, factoring in traffic potential, capital expenditure needs, geographical proximity, and financial viability. After multiple rounds of filtering, the AAI Board finalized the proposal linking five major airports with six smaller regional airports.

"The bundling of major and smaller airports under a public-private partnership model demonstrates a strategic approach to regional infrastructure development. By providing city-side land access and diversified revenue streams like aeronautical and non-aeronautical charges, the framework aims to attract private capital while balancing financial viability for concessionaires. Market sounding will be a critical next step to align these projected equity returns with investor expectations." — Dr. Shishir Gupta, Founder & CEO, StartupLanes