May 8, 2018

GETTING READY FOR A BILLION TRIPS

Jayant Sinha
In the first of a two-part series, the author argues that we must invest ahead of current demand to propel
the aviation sector and the overall economy forward
http://www.business-standard.com/article/opinion/getting-ready-for-a-billion-trips-
118050701223_1.html
In the past four years, the Aviation sector has boomed with air traffic doubling from about 100 million
trips in 2013 to 200 million trips in 2017. Total Aviation sector revenues now match those of Indian
Railways and the Telecom sector. While lower oil prices sparked this growth, it has been the Modi
government’s innovative policies that have sustained it. These policies include the first-ever National
Civil Aviation Policy, the highly successful UDAN Regional Connectivity Scheme, the AirSewa
passenger-centric measures, and many ease-of-doing-business actions. India is now poised to grow from
200 million passenger trips per year to more than a billion trips over the course of the next 15-20 years,
thus requiring a matching 5X growth in airport capacity. Airlines are already preparing for this traffic
growth. The closing fleet size for 2017 was 495, and currently there are 900 plus aircrafts on order from
our various airlines.
To ensure that these growth rates are maintained, a comprehensive capacity expansion plan NABH
(NextGen Airports for Bharat) Nirman has been announced in the Union Budget 2018. NABH Nirman
will be a multi-year program to expand India’s airport capacity: instead of playing catch-up with demand
and incurring high congestion costs, we must invest ahead of current demand to propel the sector and the
overall economy forward.
Finding Space for Airports
Many city airports in India are operating at or above capacity: over the last four years, we have created
significant capacity through both new airports and new terminals. Cities like Delhi, Patna, Pune and
Mumbai and states like Goa and Sikkim are planning or building new airports. Many cities are building
new terminals at existing airports, among them: Bangalore, Vadodara, Jaipur, and Gorakhpur. 25 airports
have already opened up over the last two years as part of the UDAN scheme.
In many of these cases, the single most factor hindering development of new airports and terminals is
land. There are unique issues with respect to land in airports as compared to, for example, roads. Large
contiguous parcels of land are required for airport construction. However, the shape of the land and
location of the land pose significant constraint on places which are viable for airports. In many cities with
currently unused or under-utilized airstrips, the development of buildings and structures around the airport
severely constrain the type of aircraft that can land.
In the case of airports, land is acquired by the state government or Air Force facilities are used. Like the
National Highways Authority of India (NHAI), the Airports Authority of India (AAI) has a robust balance
sheet. However, while NHAI has the authority to acquire land for road construction; AAI does not have
the right to acquire land for airports. This can meaningfully delay the process as the State Government
may be fiscally constrained and may not be able to acquire the large tracts of land required: between 500
to 5,000 hectares of land, depending on the size of the airport.
NABH Nirman Program
Keeping these realities in mind, NABH Nirman program has five key aspects:
Forge partnerships with States: If airport infrastructure in cities is completely reimagined, this opens up
many possibilities of redesigning the overall transport plan of the city and the connectivity plan for the
country. Creating mega multi-modal transport locations say 10-15 kms outside the current city limits
(which integrate train, bus and airport infrastructure) can help shape the direction for the city to expand
into. This will be cheaper and effective in decongesting the current city by creating new urban areas. This
requires close coordination between Centre, States and the local urban development body.
Develop many possible models for land acquisition: Some possibilities include: (1) States acquiring the
land and then transferring such land into a Special Purpose Vehicle (SPV) as the state’s equity
contribution to a PPP airport project; (2) working with the AAI for land acquisition – from legal, financial
and capability perspectives; and (3) swapping the land of an old airport within the city with land outside.
Establish regulatory framework to spur private investments in commercially viable airports: For new
greenfield commercially-viable airports, the current Operations and Maintenance Development
Agreement (OMDA) is being refined taking into account the concerns raised by the domestic airport
operator industry and global investors to make it more predictable, stable and transparent. It is expected
that between Rs 2.5 lakh crore and Rs 3 lakh crore of capital expenditure can be funded by the private
sector in such viable airports over the next 15-20 years. The current AERA Act is proposed to be
amended to provide for tariff-based bidding.
Strengthen Airports Authority of India: Via a proposed change in the AAI Act, we are trying to find ways
for AAI to develop land commercially so that these resources can be ploughed back into airport
construction. Significant enhancement in execution capacity and building of new capabilities will also be
required at AAI. Some airports may not be attractive for private players due to low throughput of
passengers and may need to be developed by the public sector. The total investment in such airports is
estimated by industry experts to be around Rs 1.2 lakh crore and Rs 1.5 lakh crore over the next two
decades. Careful financial planning and structuring of the Airport Authority of India’s balance sheet can
generate these resources. The Union Budget 2018 paves the way for leveraging AAI’s robust balance
sheet.
Prepare for a diverse aerospace future: The aviation ecosystem today largely deals with narrow-body and
wide-body planes. With the successful launch of UDAN, the turbo-prop or the regional jet market is
beginning to develop. Helicopters have also been incentivized in UDAN 2.0. Business models for
seaplanes are emerging. As India spells out its drone policies, it is possible, over the next decade or so,
that drones may outnumber the other man-made flying objects in the sky for freight and also possibly, for
passengers. India’s air navigation services will have to prepare for such a variegated, complex future.
Airports will shape not just India’s economic future, but also influence its urban geography. We want
NABH Nirman to define the building of the next wave of airport hubs - the Temples of New India.
_________________
This article is the first in a two-part series. Jayant Sinha is India’s Minister of State for Civil
Aviation and a Member of Parliament from Hazaribagh, Jharkhand. He acknowledges the
support of Akhilesh Tilotia, his OSD, in this series. These represent the personal views of the
author.