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The country's ambitious plans of making around 500 airports operational by 2020 does not seem to be much affected
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Although India’s aviation industry is facing a downturn now, the country’s ambitious plans of making around 500 airports operational by 2020 does not seem to be much affected, says Syed Ameen Kader

By the time the economic slowdown took a toll on India, there were already many infrastructure projects set in motion. Most of them were in developing national highways and airports. So would the credit crunch bring to halt most ongoing development? The popular rhetoric seemed to have stood in good stead here - infrastructure spend could cushion slowdown.

Notwithstanding the crisis, most airport developers are determined to carry on with development work. They realise that some startup projects managed by private developers could face setbacks but are dauntingly carrying on with the work.

With the government creating a fine balance of private and public players through a Public-Private-Partnership (PPP), both parties are responsible for the project.

Some of large private players that are involved with airports development in India are GMR Group, Larsen & Toubro, GVK Industries, Siemens Project Venture of Germany, Fraport AG, Erman Malaysia, Unique (Flughafen Zurich AG) - Zurich Airport of Switzerland and Airports Company South Africa.

Airport wait

While ongoing airport developments are moving ahead, it is the expansion projects that seem to be bearing the brunt.

Examples here are that of the newly-opened GMR Hyderabad International Airport (GHIAL) and Bengaluru International Airport Limited (BIAL) where expansion plans have been put on hold. Officials at both these places have denied any credit crunch situation and attribute it to the reduction in traffic projections.

Moreover, rising airfares and increasing prices of aviation turbine fuel (ATF) have compelled flyers to look for alternate modes of transport.

K Sridhar Kumar of GMR, in charge of operating GHIAL along with other partners, says, “We have frozen expansion plans for the time being. The current capacity is capable of handling traffic for another couple of years. We don’t need an expansion now.” He denied that raising finance could be the reason for deferring plans.

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The current terminal is enough to last another two years, it says. It can safely handle 9.2 million passengers by March, as compared with the 13 million it had forecast. The airport authorities have deferred its planned Rs4,000-5,000 crore second phase expansion for another two years.

While Hyderabad and Bengaluru could afford to put off its expansion plans, the same is not applicable to the Mumbai International Airport Limited (MIAL) and Delhi International Airport Limited (DIAL). Both of them have signed an operation, management and development agreement (OMDA) with the government, and this makes it mandatory for them to complete capital projects based on the traffic projections.

Authorities at MIAL, modernised by GVK Group along with partners, say, “We are on track with the schedule and timelines specified in the master plan.” MIAL will invest over Rs9000 crore towards the modernisation of the Chhatrapati Shivaji International Airport (CSIA).

The company seems sure that they are not facing any credit crunch situation. “In 2007, we tied up long-term fund based debt requirements of about Rs4,200 crore with a consortia of banks and financial institutions led by Industrial Development Bank of India Limited (IDBI),” it assured Construction Week India.

Meanwhile, recently, the government of Karnataka has awarded Marg Ltd, India’s leading infrastructure and real estate development company, the contract to develop and operate the greenfield airport at Bijapur. To be developed under the PPP model and a BOT basis, the airport will come up on 727 acres of land. Marg will design, develop, operate and manage the airport for 30 years, which can further be extended for another 30 years.

GRK. Reddy, chairman & managing director, Marg Ltd says, “We are happy to be a partner in developing this airport, which will act as a gateway to north Karnataka.” In addition to the terminal buildings, runways and control towers, Marg will also develop access facilities and build utilities necessary to serve the airport during the operational phase.

A recent report by KPMG on airport development supports the developments around airports development. It says that the economic slowdown has substantially impacted the civil aviation industry and caused it to reassess its forecasts and change plans accordingly. KPMG India’s executive director Rajeev Batra says while BIAL and GHIAL can afford to freeze expansion plans due to a downturn in traffic projections, the same can become a problem for MIAL and DIAL since they have signed OMDA.