With its eyes set on one of India’s busiest airports, Adani Enterprises is on track to become India’s leading airport operator. As per a Business Standard report, the Adani Group is set to acquire a 74% stake in Mumbai International Airport (MIAL). Marking its foray into the airports industry, Adani won bids to operate and manage development of six airports: Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati and Thiruvananthapuram. Adani entered into a Concession Agreement (CA) for three of these airports on February 14, 2020 to operate, manage and develop the airports for a period of 50 years starting from the date of Commercial Operations.
Adani has now set its sights on acquiring 50% in the Mumbai airport currently held by GVK group and another 23.5% will reportedly be acquired from MIAL’s minority partners Airports Company South Africa (ACSA) and Bidvest Group.
These six airports, along with Mumbai airport will make Adani the largest private airport operator. Currently, GMR Group is the largest private airport, operating Delhi, the country’s largest airport, and Hyderabad airports. Most of the remaining airports are run by the Airports Authority of India (AAI).
However, this is no surprise as the diversified business conglomerate has publicly disclosed plans of becoming ‘India’s leading airport operator’, something it also stated in its annual report for FY20. It also stated in the annual report that growing domestic passenger traffic is providing immense opportunity to expand and scale up its business.
“We are working towards designing revolutionary airports, with an aim to reimagine the future, offering seamless processes that facilitate touch-less operations – especially in the post COVID-19 era, when social distancing will be the new norm,” the company stated.
For the airport operations business, which usually comprises user development fees, aircraft fuelling, cargo and ground handling fees, etc and non-aviation revenues such as those from food and beverage stores, duty-free stores, advertising etc., Adani Enterprises is betting big on its non-aero revenues where it plans to develop Airport Villages to also tap into non-passenger airport visitors.
Adani wants to build infrastructure around airports as well, which includes ‘entertainment destinations’, such as malls, hotels, etc.
Apart from Adani Airport Holdings Limited, the group company has floated 13 wholly owned subsidiaries related to airports such as Adani Guwahati International Airport Limited, Adani Thiruvananthapuram International Airport Limited, Adani Mangaluru International Airport Limited, etc and subsidiaries for infrastructure and other services such as Sabarmati Infrastructure Services Limited, Vijaynagara Smart Solutions Limited, Periyar Infrastructure Services Limited, etc., which are subsidiaries of Adani Airport Holdings Limited.
And not just airports, the Adani group is also eyeing the aircraft services market and has partnered with Airbus to offer a ‘one-stop shop for all aircraft related services across India and South Asia.’
“As per estimates, the size of the aircraft services market is estimated at US$145 Bn till 2037. The two Companies shall work on multiple opportunities like aircraft maintenance, overhaul and repair, component services, training, digital solutions, airport services across India and South Asia,” the company stated in its annual report.
But Adani Group’s airport plans are not without hurdles. Even as the company won the bid for the Thiruvananthapuram international airport, it has met with major backlash from the Kerala government, which is against privatisation of the airport.
The Kerala Assembly on Monday unanimously passed a resolution urging the Centre not to lease out the airport to Adani. While moving the resolution, CM Pinarayi Vijayan said that the Centre should re-look at its decision and allow the state government to run the airport as a special purpose vehicle in which the state government has a majority stake.
While the Adani Group has been betting on growing domestic and international travel, the COVID-19 pandemic would come as a setback to the group’s ambitions. Travel and tourism have been among the worst hit sectors due to the pandemic and are not expected to return to normalcy anytime soon.
While international travel largely remains curbed, air passenger traffic in July 2020 was at 21.07 lakh, a decline of 82.3% compared to last year, with the occupancy rate of airlines in India being around 50-60%. After India resumed domestic passenger flights on May 25 after a gap of two months, only 19.84 lakh passengers travelled domestically in June this year, while 2.81 lakh air passengers had travelled domestically between May 25 and May 31.
Airlines in the country too, are facing a severe liquidity crunch, registering losses over the past two quarters. IndiGo reported its highest ever quarterly loss at Rs 2,844 crore in the April-June quarter.
The Centre for Asia Pacific Aviation (CAPA) said on Monday that the domestic aviation industry ‘requires a capital infusion’ of around $5 billion to keep it afloat as expected consolidated industry losses may stand at $6-6.5 billion this fiscal due to COVID-19.
In light of the current economic downturn, it remains to be seen if Adani is able to execute its airport operator ambitions and turn it into a profitable business, even as players such as GVK (which managed Mumbai airport) reels in severe losses.