Wednesday, March 06, 2013

DOMESTIC AIRPORTS: R-ADAG

One year back, Reliance ADPL came out victorious on its new turf of airports development by winning the bid to develop 5 airports in Maharashtra. B&E meets Reliance’s top executives to get the mid term progress report by Swati Sharma

The company has also hired a team of experts from New York based consultants Louis Berger Group and Knight Frank that will be laying the future road map for the development of airports with the investment reaching beyond `5 billion already in line for the next three years. “Modern regional airports will boost tourism, stimulate the aviation industry and create business opportunities for us and we believe that they will catch up soon in times to come,” Ravi Radhakrishnan, Business Development Manager at RADPL tells B&E. RADPL is now bidding for the new international airports in Navi Mumbai, Pune, Noida and Goa with the projects pegged at `240 billion, apart from non-metro airports in Gujarat and Andhra Pradesh.

But there are a few critical challenges: some financial, and some because of the external environment. Currently, the returns on investment have not been high from the five airports owing to overall low traffic (of passengers; and consecutively, airlines) and as a result, other sources of revenue like food and beverages are also not very lucrative. The issue of demand, which RADPL seems to have analysed, still has some blank spots. Some are quite straightforward. For example, Baramati as a regional airport is targeting Mumbai and Pune clientele. However, Baramati is just a 2.5 hours ride from Pune, putting a substitute road travel option a big competitor to airlines operating Pune-Baramati flights, therefore ensuring that such airlines operate lesser flights.

Vidya Basarkod (CEO, RADPL) comments to B&E, “The challenges in development of smaller airports also include limited traffic and the high cost of mandatory infrastructure & security and limited sources of aeronautical & non-aeronautical revenue.” The government, though, has (or rather, had) attempted to be proactive. The government had granted waiver for landing and parking charges to aircrafts with less than 80 seats operated by domestic scheduled operators and helicopters of all types. The government apparently did this to ensure encouragement of smaller aircraft operations to regional airports. But strangely, there was no obvious connection of this made with regional airports, as the small aircraft operating airlines simply chose the metropolitan or ‘trunk’ routes over regional destinations. Now, AAI is demanding that this waiver policy be revoked, as it didn’t serve the original intent of motivating traffic to regional airports.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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