Building Every Airport As Aerotropolis

India needs USD 50 billion investment to build airport assets over 2 decades

• Currently, there are 108 operational airports in the country, including 21 AAI-run international airports, seven international airports in joint ventures and one private state government-run international airport.
• India needs an estimated USD 50 billion in building airport assets over the next two decades to cater to demand, with the next five years expected to see significant investments in the airports sector, according to a report. By 2027, the number of domestic passengers is estimated to be around 500 million while the number of international passengers is expected to swell to 200 million by that time.
• Currently, there are 108 operational airports in the country, including 21 AAI-run international airports, seven international airports in joint ventures and one private state government-run international airport. The country also has 10 custom airports, 58 domestic airports and another 11 private/state government-run domestic airports, according to the AAI website.

• India needs over USD 50 billion in building assets to cater to the estimated demand over the next two decades. Our immediate need over the next five years is estimated to be USD 20 billion. Much of that investment will need to come from the private sector.

• Private interest in developing large commercially viable assets has also allowed the government to focus on financing regional airport infrastructure with the intent of expanding regional air connectivity and supporting traffic growth at hub airports.

• So far, 12 airports have been cleared this year for privatisation — Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, Guwahati, Amritsar, Varanasi, Bhubaneshwar, Indore, Raipur and Trichy.

• The 2020 Union Budget has proposed the development of 100 new airports under the Ude Desh Ka Aam Nagrik ( UDAN) scheme in addition to the already existing ones under the initiative.

• The National Infrastructure Policy (NIP) 2020, envisages 68 various projects entailing a capital expenditure (capex) of USD 19.1 billion over five years, more than half of the 50 busiest airports in the country are operating over capacity since 2018.

• Also, as per the ‘Infrastructure Vision 2025’ document, as many as 30–35 AAI-run airports are to be awarded for concession.

• The Infrastructure Vision 2025 is the cornerstone of India’s infrastructure policy and is principally meant to improve the ease of living in India.

• To streamline project implementation and facilitate investments, the government has integrated various infrastructure projects under the programme. To achieve the programme’s goals, the government has also announced NIP projects worth USD 1.5 trillion over 2020–25.

• Aviation is one of the worst-hit sectors globally because of COVID-19 & airport and airline businesses in India have lost more than half of their toplines (revenues) in 2020–21.

• But, the silver lining is India’s strong domestic market, which has already seen a steady increase in air traffic on many routes since resumption of air services. However, returning to pre-COVID-19 traffic levels may take 18–24 months.

• Corporate travel may continue to remain muted for some more time even as the world recovers from the pandemic as businesses will need to rationalise costs to recover losses and save jobs.

• However, the leisure travel is expected to be bounce back faster, with opening up of international traffic on select corridors in phases (under various air bubble agreements) which will see a further upswing in the next 12–18 months.

• There are several reasons to be optimistic about India’s ability to become the second largest or possibly the largest aviation market in the world in the next two decades notwithstanding the short-term impacts of COVID-19.

• Reasons include low air traffic penetration, growing per-capita incomes, increasing global mobility of the middle class and higher propensity for leisure and business travel facilitated by global growth in trade and commerce.

• India has witnessed tremendous aviation growth over the last decade. Until the coronavirus pandemic hit, airports were bursting at the seams and the capacity was behind demand.

• Financial year 2019–20 saw 341 million travellers, 2.5 million aircraft movements and 3.3 million metric tonnes of cargo fly in and out of Indian airports. This was driven by a 300 million strong middle class, low air travel penetration and an increasing propensity to spend.

• Yet, when it comes to airport infrastructure the fact is that India’s airport infrastructure has misaligned to the market needs. In that it focused on function over form. As of now this aberration continues. How did this come to be?

The Distorted Capacity Narrative

• Ask any airport for capacity details and they are quick to recite their annual terminal capacity numbers along with glossy photographs of their latest construction.
• Indeed, if one looks to airport development in India, majority of the capacity expansion has focused on terminals. While there have been greenfield developments, these have often entailed a monopoly right for the airport operator thereby prohibiting use of older airports by commercial airlines — for instance, the Hindustan Aeronautics Limited (HAL) airfield in Bengaluru or the old airport at Cochin.
• Thus effectively the expansion is limited to airport terminal capacity. The fact that is often lost is that the ability of airports to accommodate flights depends on three major elements.
• Namely, airside capacity that is the number of aircraft takeoffs and landings per hour that can be accommodated and how many aircraft can be based and handled at the airport; terminal capacity which is the number of passengers that can be processed through the terminal during peak times; and landside capacity which is traffic flows in and out of the airport.
• The total capacity of the airport is the comprehensive view of the landside, airside and terminal capacity — and not just terminal capacity. Yet the narrative does not account for this.

The Nature Of Demand Is Glossed Over

• Airport capacity planning first and foremost requires an assessment of the market scenario and forecasts. In this, understanding the nature of demand is critical. Not all demand is created equal.
• Delhi has very different capacity requirements than Dubai, Chandigarh has very different requirements than Chicago and Lucknow has very different requirements than London. Even locally the models must account for nature of demand which varies by region.
• Yet for India, western models are often force-fit on Indian airports leading to capacity plans that are out of sync with the market. The irony: in the end it’s the traveller that pays for these mistakes.
• The nature of demand in India lends itself to the fact that it is a price sensitive market where on average any two domestic points are 1.5 hours apart. Additionally, 75 per cent to 80 per cent of current traffic demand has a metro city at one end.
• Accordingly airlines have focused on narrow-body aircraft and on frequencies. Thus airport capacity for India ideally should have been built and expanded in a manner that was low-cost and highly efficient — focused on handling a growing number of air-transport-movements. And in a manner that not only viewed individual capacity but the overall system capacity. This has just not been done.

Bad Advice And Poor Planning

• Airport capacity poses a huge challenge for Indian aviation. While the country has a total of 449 airports, only 105 airports were operational as of mid 2020. Of this 105, six metro airports of Delhi, Mumbai, Bengaluru, Hyderabad, Kolkata and Chennai continue to be key to aviation traffic with about 61 per cent of the domestic traffic and about 73 per cent of international traffic still originating here.
• Further, when it comes to airport capacity what is valuable is peak-time capacity. Namely, the ability of the airport to handle traffic during periods aligned to demand. For instance, at 9am one does not have enough capacity while the opposite may be true at 3am. Thus peak capacity is what is critical and what matters.
• Even as we approach a post pandemic reality, peak slots across the metro cities are taken and parking is at saturation. For airlines this means a forced dispersal of capacity towards non-metro and Tier 2 cities which too are struggling with airport capacity.
• The poor capacity planning is a result of the lack of an integrative approach. Planning is done at an airport level, instead of at a city level and on a country level.
• While experts may argue that this is exactly how it is done overseas, the fact that is overlooked is that Indian aviation is still in an evolutionary phase. Thus the planning process has to incorporate elements that are extremely dynamic in nature — from immigration patterns, to competing modes of transport, to land acquisition to weather patterns.
• When not done so, it often has a contradictory consequence. Take for instance the Pakyong airport which provided air-connectivity to Sikkim. The airport was planned and constructed but it would seem that the cloud base and weather patterns were not incorporated thereby making it a VFR (visual flight rules) airfield only. No landing aids are installed thus as the weather hits, airlines are forced to cancel flights.
• The only operator to the airport has suspended flights for more than a year citing the same reasons.
• Similarly Bengaluru airport, spent a significant amount but only built the first runway to be CAT-I compliant (a technical specification which deals with the ability of aircraft to land in low visibility conditions). This has consequences for passengers and airlines alike when fog patterns hit.
• The challenge of capacity planning also depends on how planners look at airports in a broader context. Airports after all are connectivity nodes for respective cities. Planners thus have to factor in the urbanisation trends as well the overall master plan. This is simply not being done.
• Take for example items such as intermodal connectivity, alternate means of transport, traffic flows, and one immediately sees the glaring inconsistencies. For instance, Mumbai has two terminals T1 and T2 but these are not well connected either on the land-side or on the air-side.
• Similarly, Delhi airport had some airlines split operations between three terminals making for higher costs, lower efficiency and confusion for travellers. The list goes on…

Force-Fitting Western Models Exacerbates The Situation

• Airport master planning is a skill that requires expertise and also an understanding of the Indian market and its prospects. Several firms pitch projects that highlight how a particular city will be the most vibrant hub-airport in the future. They support this case with the geo-strategic location of India and the traffic trends.
• Often what is overlooked is the fact that a hub requires several elements including a strong anchor airline with a specific business model. Attempting to copy the aviation success of airports such as Singapore, Dubai, London is fraught with inconsistencies — yet several airport pitches and plans call for doing just that.
• Force-fitting Western models is widely accepted in the market and sadly it is the flying public that has to pay for these mistakes. Something as simple as laying carpet at airports cannot simply be copied and has to be seen in context. Or building airports using large amounts of glass and steel — materials that may work well in cold climates but are not suited for many locations in India.
• Similarly, when one looks at terminal-design there is a focus on maximising retail space — one of the factors leading to expensive terminal buildings. In many cases the retail spaces are expanded while compromising passenger space.
• Other design concepts like a central atrium, walkways, split level food courts etc, are also force-fit to the Indian market. The end result is that for something as simple and integral to India as a cup of tea, Indian airports often force the passenger to pay Rs 150 for chai (tea) while forcing passengers navigate their way through a maze of shops and elevators.
• The only way such a model sustains itself is due to the airport operator having a complete monopoly — which consequently impacts capacity.

The Costs Of Misaligned Capacity: Borne By The Traveling Public

• If that wasn’t bad enough, the funding mechanism of airports is such that the costs of incorrect capacity planning are borne by passengers via development fees. The numbers speak for themselves.
• In the case of Delhi airport, the final project cost was 3.8 times the initial estimate and in the case of Mumbai it was 1.7 times the initial estimate. The cost of these overruns was covered by the flying public. Both airports were allowed to levy development fees to the tune of approximately Rs 3,400 crore.
• The contribution via fees levied on passengers being 1.2X-1.4X the equity contribution in the case of Delhi and 3.0X-3.2X in the case of Mumbai. This is neither a fair nor a sustainable proposition.
• Similarly, when one looks at financial mechanisms on how airport tariffs are regulated, the country has adopted structures which are not conducive to keeping costs low.
• The argument airports make is that without such structures airports will not be able to get capital commitments required to modernise airports and generate an adequate return on equity. But the need of the hour is to revisit the cost of building airports first and examine new innovative methods of building low-cost and high quality infrastructure that is fit for purpose. On this front the country is left wanting.
• The regulatory structure also exposes passengers towards bearing the cost of capacity decisions. The current situation demands revisiting the regulatory structure — again to be fit to the market dynamics. In a country where majority of the traffic is concentrated in metros and urbanisation is on-going the policy needed to address existing metro-capacity and costs which it does not. While a regulator has been constituted, decisions that favour passengers often end up in appeals (which are heard by the telecom tribunal) and eventually ending up in courts. Again the impact is most on the travelling public.

Jewar Aerotropolis

• The Government of Uttar Pradesh has signed a concessionaire agreement with Yamuna International Airport Ltd and SPV of Zurich Airport International AG, for the development of International Airport in Jewar, Greater Noida. The airport envisaged to be the quintessence of global aerotropolis headquartered in India, will be proficient with Swiss technology and efficiency along with the success and status of being Asia's largest airport in terms of the proposed five runways in future which will spread over more than 10,000 acres of land.
• Jewar Asia's largest Aerotropolis, will serve as a powerful business magnate and metropolitan region economic accelerator which will increasingly attract and catalyze business activity, employment generation and commercial development around its proximity. Furthermore, to attract investment, boost growth and create jobs, Yamuna Expressway Industrial Development Authority (YEIDA) has floated an open-ended scheme to allot plots to those who want to set up businesses and industries. Metro line connecting Jewar to Delhi airport has also been proposed by the YEIDA. Townships like Greater Noida, Delhi, Gurugram, Faridabad, and Ghaziabad positioned strategically from the airport and the upcoming metro line can see long term growth as an urban sub-region whose infrastructure, land-use, and the economy will consist of the airport's aeronautical, logistics, and commercial infrastructure anchoring the airport city at its core, and outlying corridors and clusters of aviation-oriented businesses and residential development that provide accessibility to the airport.
• The economic corridor and the aerotropolis will provide easy accessibility to a number of state highways and expressways and will make travel easier and shorter. The upcoming aerotropolis will be the largest in Asia with projects like MRO/ Cargo complex, MSME, electronics, apparel, handicraft, Toy Park etc. being proposed in the region. The State Government has recently announced a film city of over 1,000-acre plot located just about 6 km from the proposed Jewar International Airport. These schemes are expected to bring investment worth Rs 40,000 cr. and around 2.5-3.0 Lakh employment.
• The aerotropolis is expected to commence its operation of phase-I in 2024 with two runways spread over 3300 acres. Jewar airport will operate as a fully digital airport, providing a safe and contactless travel experience and customized commercial offerings for passengers. This will be the first net-zero emissions airport in its class, setting a new standard for sustainable aviation. 
• Taking inspiration from state-of-the-art international airports like Fort Worth International Airport in Dallas, Incheon in South Korea, Schiphol in Amsterdam and more, Yamuna Expressway Industrial Development Authority (YEIDA) is planning an ‘aerotropolis’ in the vicinity of the upcoming international airport at Jewar. The term ‘aerotropolis’ is used to define a metropolis built around an airport.
• A city site development plan has been readied by Ernst & Young, YEIDA’s consultant for the sanctioned airport project. Ernst & Young have carried out a survey and submitted a report about the feasibility of the proposed project, which will span across 2,000 hectares of land in the vicinity of the airport.
• According to YEIDA officials, the aerotropolis will offer significant scope for development beyond the airport space, which is proposed over 3,000 hectares of land. As per the study conducted by consultants, the international airport at Jewar has tremendous potential for an aerotropolis in collaboration with global investors who will bring in capabilities and experience.
• As per the study, several airports across the world have similarly developed facilities through which the airport earns revenue. Globally, airports have embraced the concept of developing the surrounding commercial areas and be more than just a great airport and instead become economic drivers.
• Both the projects—proposed airport and aerotropolis—will be developed side by side. The aerotropolis will be developed in such a way that local needs are synched with land parcels in the vicinity of the airport. Infrastructure upgrade, economic, environmental and social sustainability will be approached holistically.
• Space will be planned as a sustainable urban node that facilitates a thriving economy and community. While 40 per cent will be set aside as green space, it will primarily focus on hosting business and retail opportunities, with some space dedicated to leisure activities, including golf courses, and an orchid and butterfly park.