The Hindu Business Line : ‘Develop surplus land near airports to step up revenue’

Bangalore, Oct. 26 Airports in India have the potential to become money spinners if the nearby surplus land is developed for building retail malls, hotels, logistics and air cargo facilities.

In a report on airports ‘Indian airports-global landing grounds’, consultancy major KPMG has said ‘aerotropolis’ (similar to a traditional metropolis), which contains a central city core and its commuter-linked suburbs, can lead to substantial non-aeronautical revenues for the developers.

The KPMG Executive Director, Mr Rajeev B. Batra, said airports in India are a future potential area; not just from an aviation perspective but also from a real estate point of view.

“While this might be a new phenomenon in India, globally, airports have embraced the concept of developing the surrounding commercial areas,” he said. He added, “In an aerotropolis a significant component of the revenue comes from non-aeronautical components, which are known to yield faster returns compared to the aeronautical components that are helpful for financial standing of the airport developers.”

Next step

The KPMG report also points out that ‘low-cost airports’ and ‘non-operational airports’ have the potential to be the next step for the Indian airports industry.

Besides offering the advantage of enhancing connectivity across the country, these airports can rationalise costs incurred by the airlines and decongest traffic at regular airports. The report suggests these airports can also provide the much-needed relief for ‘low-cost carriers’ whose financial position has been negatively impacted by rising aviation fuel prices and operational costs. The report says an aerotropolis has an ‘airport city’ at its core, which comprises retail malls, leisure and culture centres, logistics and air cargo, hotels and entertainment, office and retail complexes, and is surrounded by clusters of aviation-related enterprises.

Components

The area surrounding the airports has the potential to be developed as a hub of business, retail and hospitality centres. In an aerotropolis, a significant component of the revenue comes from non-aeronautical components, which yield faster returns compared with the aeronautical components.

The report points out non-aero revenues in UK airports, Frankfurt as well as Vancouver airports are higher than aeronautical revenues.

The challenges faced in the development of these commercial centres include getting clearances from the government and land acquisition

Potential aerotropolises

The KPMG report suggests that the Indira Gandhi International airport in Delhi has the potential to be developed as an aerotropolis as it has national and global air connectivity, a reasonable amount of developable land around it, and the potential for passenger and cargo growth.

It says that the greenfield airports also present an opportunity for aerotropolis development. As 100 per cent FDI is allowed in greenfield airports through the automatic route, aerotropolises in India have the potential to be developed in collaboration with foreign investors, who will bring in capabilities and experience.

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