A private-fuelled public take-off

In the post-reforms period, the public sector grew, and faltered. In the latter case, across many sectors, the private groups profited from the decline and demise of the state-owned firms. However, there may be a unique case when private revenues bolstered the public profits. Adani Airports, which was recently in the news because of the hype about massive expansion, and forthcoming IPO (Initial Public Offering, and is part of one of the fastest-growing private groups, may have aided and abetted the profitability of the state-owned Airports Authority of India (AAI). Unlike many public sector firms, AAI gained from the former.

According to AAI’s 2024-25 annual report, which was released recently, lease revenues from airports, including those managed through public-private partnerships (PPPs), accounted for more than a third of the annual revenues, or a jump of almost 50 per cent over the previous year. The six PPP airports, Ahmedabad, Jaipur, Lucknow, Mangaluru, Guwahati, and Thiruvananthapuram, are operated by Adani Airports, and contributed almost `3,200 crore, or more than 15 per cent of the annual revenues. The remaining came from the deals with the two major airports in Delhi and Mumbai, which have legal complications.

Experts contend that in the fast-changing aviation landscape, the state is surely shifting from an operational model to a ‘landlord’ one, where it earns by leasing the airports and aviation infrastructure. The so-called rental revenues drive the profits too. One of them feels that such revenues contribute almost a third of the profits. This is substantial. The combined revenues from the six PPP airports (`3,200 crore), and Delhi and Mumbai together (almost `4,200 crore under joint venture model), account for nearly 36 per cent of the annual revenues in 2024-25, and add `700-odd crore to the profits, according to experts.

As per the annual report, “This (PPP) demonstrates the continued success of our… arrangements, and their positive impact on revenue generation.” In the case of Delhi and Mumbai, revenues went up by 4.52 per cent compared to the previous year. But the major jump was in the six PPPs, where the topline growth was more than three times, largely due to what is dubbed as ‘under-recovery’ or “compensation paid by private operators for investments AAI made before the airports were leased out.” The under-recovery contributed more than `2,200 crore, and includes one-time payment that will not recur.

This is explained in the annual report’s notes to the accounts. The PPP deals note that the “Concessionaire (Adani) shall be liable to pay to AAI an amount equivalent to the investments made by AAI in the Aeronautical Assets… considered by the Regulator as part of the Regulatory Asset Base, subject to requisite reconciliation, true-up, and final determination by the Regulator of the quantum of such investment. The Concessionaire shall also be liable to pay to the AAI an amount equivalent to the estimated depreciated value of investments made by the AAI in Non-Aeronautical Assets… towards development of Non-Aeronautical Assets, i.e., Initial Non-Aeronautical Investments.”

In addition, the private party in PPPs pay fees per passenger , which are different for domestic and international travellers, to the AAI. In 2024-25, the domestic passenger fee went up between `20 and `31, and for international ones the hike ranged between `41 and `62. The highest fee for domestic passengers was in Ahmedabad, with the lowest in Mangaluru. The situation was the same in the case of international passengers.

The difference between domestic and international in the six airports is the same, double for the latter.

Media reports indicate that the financial fortunes of the AAI seem to be built not just on the growing ‘landlord’ model, with leases and rentals being the income earners, apart from profits, but on the slippery operations. Without the first, the second is tarnished, as the “bulk of its own network remains under strain. An estimated 91, or about 75 per cent, of the 122 airports owned by AAI reported losses of `1,600 crore, while the remaining 31 airports earned a profit of `2,740 crore” in 2024-25, according to an analysis in a media report.

Of the profitable airports owned by the AAI, Kolkata generated `855 crore, and Chennai `500 crore, with Pune, Patna, Srinagar, and Bagdogra being in the black. The ones in the red included those in Rajkot, Vijayawada, and Kushinagar, with the ones in Shimla and Vellore being non-operational. The scenario sketched out may indicate that private rentals, especially from the Adani Group, saved the AAI. This is possibly the way forward as reports indicate that the private partner hopes to invest $15 billion in airports over the next five years.

The aim is to increase passenger capacity to 200 million annually, with huge upgrades at the five PPP airports, minus Mangaluru, and new terminals, taxiways, and a runway at the Navi Mumbai International Airport. It may participate in the bidding for more airports, 11 of which may be up for grabs in April 2026, according to news reports. Thus, there is a sense of excitement about privatisation, either as PPP or joint venture, despite the legal and policy complications. If Adani bags some of the new airports, it may prove to be a boost for its IPO in 2027-28.

However, if one looks closely at the data, the two of the major revenue earners for the AAI in the private models are Delhi and Mumbai, the two metros that handle the bulk of passengers and freight, both domestic and international. The six PPPs managed by Adani are huge tourist attractions for inbound, outbound, and internal travel. The same is the case with the airports owned by the AAI, with major revenues from Kolkata and Chennai, and other well-travelled destinations. Thus, most of the money comes from thriving airports. The private parties may or may not have much to do, except increase in efficiency, and extra investments, which the AAI was unable to do.

One will need to see what happens in the next round of 11 airports, when the government plans to bundle the seemingly-profitable ones with loss-making ones. Until now, the private sector bagged the profitable assets, or those that were low-lying fruits, whose fortunes were easy to turn around with minimal efforts. If the private sector can show similar results in the bundled airports, it will prove its success. Until then, the issue is open. Blaming AAI, and praising the private sector may result in more profitable airports falling into the latter’s clutches.