The Adani Group on February 14, 2020, signed agreements with the Airport Authority of India (AAI) for operations, management, and development of Mangaluru, Ahmedabad, and Lucknow airports. According to the agreements, the group will run these airports for 50 years since the start of their commercial operations.
This marks the beginning of the group’s takeover of the six airports it was handed over to run for 50 years. The group had outbid some other players like the GMR group by bidding substantially higher than their bids. A senior official of the group defended their high bid saying the group’s revenue generation model is going to be different.
The group has won by bidding a higher concession fee per passenger to be paid to the AAI. It estimates that the number of non-passengers visiting the airports in India is nearly three times the number of passengers. The group aims to tap this market of non-passenger visitors at the airports to ramp up its revenue – a model that few of the private airport operators have factored in so far.
In a tweet, Gautam Adani, Chairman, Adani Group, said, “Today, as we sign the concession agreements for Mangaluru, Lucknow, and Ahmedabad airports with the AAI, it’s the beginning of another historic journey catering to India’s exponential airport infrastructure demands.”
The Adani Airports Ltd. has created one subsidiary each to run the three airports for which it has received Letters of Awards (LoAs). These new entities are Adani Ahmedabad International Airport Ltd., Adani Mangaluru International Airport Ltd. and Adani Lucknow International Airport Ltd.
In 2018, six airports – Guwahati, Lucknow, Jaipur, Mangaluru, Ahmedabad, and Thiruvananthapuram – were put out for privatisation. The Adani Group was awarded all these six airports after several rounds of competitive bidding.
The AAI has said that the money earned through concession fees would be spent on the development and maintenance of airports under different categories – brownfield, RCS-UDAN, and Greenfield. Over the 50 years, the group is expected to pay $45.265 billion to the government for running these airports.
These six airports that the group has been awarded to develop and operate together handled over 31 million passengers last year, recording a growth of 22% over the previous year. The group sees scope for expanding the capacity to over a million passengers in 10 years.
Recently, the group won approval for developing its private airstrip into a commercial airport at the Mundra port, entailing an investment of Rs. 1,400 crore. At present, the Adani Group is hot on the airport business and its targeted Rs. 26,000 crore capital expenditure over the next five years will mostly be spent on this sector.
The latest round of privatisation of airports follows the first such bid in 2006 when airports in Delhi and Mumbai were given away to private entities for development, maintenance, and operation for 30 years. In contrast, the Adani Group has a longer concession period of 50 years for the six airports. The longer concession period makes it easy for the group to raise funds and generate revenue. Industry analysts believe that the group’s foray into the airport business will spur other players to increase their stake in the game. The group has a market capitalisation of Rs. 2.50 lakh crore and has business interests spanning across power distribution and generation, coal mining, and ports and logistics.
Looking at the stability of the group as a corporate entity and its experience in the development and handling of infrastructure projects, accessing funds for the group is never a problem. The group had also bid for the proposed Jewar airport in Noida, Uttar Pradesh. But despite bidding higher than the GMR group which has the primary right of refusal as it runs the Delhi airport, the Adani Group lost the bid to Zurich Airport International whose bid was considerably higher than that of the Adani Group. However, it is still in the race with competitors such as L&T, GMR, and Reliance Infra for building the airport which is pegged to cost around $2.32billion.
Besides making successful bids for the six airports, the Adani Group is aggressively pursuing two South African companies for buying out their combined 23% stake in the Mumbai International Airport (MIAL), a bid that the GVK group is opposing.