Spotlight – Waiting to take off
Recently, the government announced that five new Greenfield airports would come up in the next two years. These airports would be located at Pakyong in Sikkim, Shimoga, Gulbarga, Bijapur and Hassan in Karnataka. The government also accorded ‘in-principle’ approval to the establishment of seven new airports and has also received proposals for establishment of another eight new airports across the country. This is in addition to the various other Greenfield and Brownfield airport projects underway in the country.
These are clear indications of the unprecedented airport infrastructure development taking place in India. And these obviously translate into huge opportunities in this sector. Explains why IRB Infrastructure Developers Ltd, a leading highway development company, has forayed into airport development recently. IRB has been declared as the selected bidder for the development of a Greenfield Airport in Sindhudurg district of Maharashtra (one of the seven airports receiving the in-principle accord).
An analysis from Frost & Sullivan – rightly titled – Strategic Opportunities in the Indian Airport Infrastructure Market – finds that investment in airport infrastructure was over US$5 billion in 2008 and expects this to reach US$9 billion by 2013. Of this, nearly, US$6.8 billion is expected to come through public private partnerships (PPPs). The addressed market includes both the Greenfield and Brownfield opportunities.
Notwithstanding future projections and growth potentials, it is important to understand the ground realities. According to Niranjan Simha, head, airports segment, I&CB, buildings & factories operating company, ECC Division, L&T LTD, the airport infrastructure sector today is going through a flux. “From a boom period a few years back this sector is now at crossroads of taking major decisions of expansions and new developments. All activities in this sector are now happening post-requirement rather than being future-proofed. However, there are efforts from the ministry and developers to revive this sector through innovative means of alternate revenue generating methods and spurring of the airline industry,” he adds.
PK Sundaramoorthy, MD, Hunter Douglas India feels that a lot is required in the form of basic infrastructure in this sector in the coming time. He points out that barring a few airports, most airports in India lack the minimum basic amenities. “Ever gone and seen the Chandigarh Airport? Happens to be India’s fastest booming city – it’s a true reflection of how handicapped our infrastructure planning/foresightedness is. There’s lot to be achieved in terms of good planning and right kind of product to build a state of the art airport in India which can be called truly international,” he says. Incidentally, Hunter Douglas has experience in more than 100 countries and its architectural products are been used in numerous airports across the world.
The challenges & way ahead
L&T over the years has evolved as a major EPC player and now has an exclusive segment for end to end solutions on airport infrastructure projects catering to the niche requirements of the sector. Talking purely from an EPC player’s perspective, Simha of L&T points out that the major challenge is to satisfy the various stakeholders by incorporating the different wishes/wants of each into the works without marring the schedules and cost.
In terms of sectoral challenges, Simha feels that the sector has risen from being bracketed in the luxury segment to now being accepted or even being deemed in the parenthesis of essential services. Hence, he believes that the challenges faced by this sector have been dynamic. He acknowledges that currently the industry today is facing a downturn due to falling demand spurred by high price of travel and the global melt-down. A major impediment is the price of fuel, he says pointing out that environmental issues are also being discussed and are figuring as a major challenge facing this sector. “A common framework for airport infrastructure through the AERA has been tabled. This needs to be evolved to have a level playing field for all who wish to enter or sustain in this sector,” Simha remarks.
“The primary challenges that face the market are financing and the identification of key geographical areas,” says Frost & Sullivan research analyst Chethan Kambi. “Funding for the airport development projects encompasses equity from loans, government grants, investors, AAI, and consortium partners, all of which will be invested in the project in a phased manner to accommodate planned expansions,” he adds.
The biggest challenge, according to Sundaramoorthy of Hunter Douglas is rampant corruption and lack of vision to build infrastructure. “When we have world class products available in India, we try to cut corners in terms of building right infrastructure by going for low price horrible products which neither match quality nor are used from a long term perspective of application. And the irony of the fact is that the same mistake gets repeated project over project,” he says.
“Airport infrastructure, unlike many other, needs a collective working platform for various disciplines to work in a highly focussed environment to integrate and ‘make it work’,” says Simha. “We need a radical approach to overcome these issues at every sphere of decision making,” says Sundaramoorthy.
Simha also draws attention to certain policy related issues. “The benefit of custom duties by treating airport development under infrastructure, the early finalisation of the AERA bill, rationalisation of the taxes, declared goods status for ATF and connectivity support are few of the issues that need to be taken up by the government to spur the industry out of difficult times,” he says.
Future outlook – Opportunities galore
“The future of this sector is highly dependent on the cranking the business environment into overdrive. The governmental help in terms of policy decisions to spur the growth of the industry is also critical,” says Simha.
Of course, the challenges are enormous. However, as the Frost & Sullivan analysis points out, there are immense opportunities in the next five years for all the vendors and stake holders in the Indian airport infrastructure markets across all segments including airport security, airport communication, navigation and surveillance, access control and perimeter security, airport maintenance, asset management, GSE and GHE service providers and airport refeullers. This growth will continue to be driven by India’s progressive economy, better scope for connectivity, growth in tourism, proactiveness shown by airlines and the correct government initiatives.
Yogen Lal, COO, Unity InfraProjects Ltd agrees that the Indian civil aviation sector is showing an extraordinary growth rate in the last few years. “If this high growth is to be sustained, it calls for improvement of infrastructure facilities on several fronts. This implies enormous opportunities in the next five years for infrastructure companies,” he says.
Speaking from the vendor perspective, Sundaramoorthy, points out that airport modernisation should be done from a long term prospective not execute just cosmetic changes. “Every major city needs airport modernisation from a long term prospective not cosmetic changes. As we grow, airports are a basic building block and mirror of our global superpower. We are optimist of a lot of Hunter Douglas products can compliment India’s aspiration for building better airport infrastructure and we’ll introduce more new products and solution in the coming days to suit the demanding need for Indian market,” he says.
According to the Association of Private Airports Operators (APAO), the Mumbai, Delhi, Hyderabad, Bangalore and Cochin airports are collectively making a massive investment in excess of Rs30,000 crore in modernising existing infrastructure and developing new infrastructure. The Airports Authority of India is also engaged in the modernisation and development of 35 other airports across the country. These projects would transform the Indian aviation sector by providing world class infrastructure, facilities and services. The new airports will also allow airlines to add capacity, develop hubs and streamline operations to extract maximum operating benefits.
For the complete article, see the August issue