Airports can exploit huge land assets to fly high


Non-metros and small towns could soon have glitzy malls, hotels and convention centres on the sprawling land parcels that belong to the Airports Authority of India (AAI) but have been lying vacant for years. Finance minister Arun Jaitley’s Budget cleared the way to amend the AAI Act “to enable effective monetisation of land assets”.

“The resources, so raised, will be utilised for airport upgradation,” the FM said. He also allowed private sector participation in operating and maintaining airports in small towns, as in their metro counterparts.

The Modi government estimates that developing airports across India over the next 15 years will require an investment of Rs 2-3 lakh crore, minus the cost of land. AAI has a huge land bank of 55,687 acres across the country – collectively one-and-a-half times the size of Chandigarh.

However, the AAI Act currently allows using this land only for aviation-related activities. “(With cities expanding) AAI airports are now in the middle of most cities. The demand for use of our land is for things like malls and convention centres, which the Act does not allow at present. With the Budget talking about amending the Act, we will be able to utilise our land in a more market efficient manner. This is a very good development,” said AAI chairman Guruprasad Mohapatra.

Globally, due to efficient land use, airports are able to generate almost 40-45% of their total revenue through non-aeronautical uses. “Our non-aero revenue accounts for 20-25% of the total generation. We will be able to increase that and bring it on a par with global standards with the change,” Mohapatra said


But commercial exploitation of land at sensitive airports like Srinagar or Jammu and civil enclaves – which means airports managed by defence authorities with a terminal for commercial flights, like Agra and Jodhpur – may not be easy.
The Modi government’s focus on airport development, and ways to fund it, coincides with the soon-to-be-launched subsidised regional flights that will have fares capped at Rs 2,500 per hour of flying. The Budget provides a further push to this by waiving the 14% service tax on regional flight operators for a year.

Amber Dubey, head of aviation and partner at KPMG, said: “Many AAI airports, especially at state capitals, have significant commercial value. The revenue generated can be utilised for airport upgradation, development of new regional airports and for reducing aeronautical charges.
However, state-run Air India got Rs 1,800 crore against the Rs 2,844 crore it sought in FY18. The Economic Survey had made a case for divesting AI. “All states, all societies, have some ambivalence toward the private sector… Consider the civil aviation sector. Defying history, there is still the commitment to make the perennially unprofitable public sector airline ‘world class’,” the Survey had said, making a clear reference to AI.