India set to spend billions on airports: Here's why it makes sense

By Girish Linganna | First Published Mar 21, 2023, 9:57 AM IST

With the surge in travel demand, India requires improved airports with greater capacity. India plans to increase the number of its airports from 148 to 220 by 2025, says Girish Linganna

Over the course of the next two years, India is planning to invest approximately Rs 980 billion (equivalent to US$12 billion) in the development of its airports. This move comes in response to the rising demand for air travel, which has also led to increased orders for new aircraft by airlines, thereby creating a need for upgrading existing airport infrastructure, according to a Bloomberg report.

India, which holds the title of the world's fastest-growing aviation market, plans to increase the number of its airports from 148 to 220 by 2025. Private investors have committed around $9 billion towards the construction of new airports and terminals, besides refurbishment of the existing facilities, while the state-run Airports Authority of India (AAI) will provide the remaining funds.

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The expansion will include the development of greenfield projects and the modernization of former military airfields dating back to the colonial era. Despite India's population of 1.42 billion, the country only has 700 aircraft, which is fewer than the United Airlines fleet. Airports in such major cities as Delhi and Mumbai are still facing issues of limited availability of parking and landing slots.

India is becoming more assertive on the global stage due to its growing consumer base and economic growth, which is expected to surpass China’s economy in the near future. The aviation industry in India has already made significant strides, with Air India recently announcing the largest deal in commercial aviation history. Both Boeing and Airbus have been procuring components from India for several years.

Civil Aviation Minister Jyotiraditya Scindia says that India aims to become a dominant player in the aviation industry soon. The three-day CAPA India Aviation Summit commenced on Monday (March 20, 2022). According to Boeing's estimation, India's passenger traffic is anticipated to increase yearly by almost 7 per cent from 2022 to 2041, in contrast to China’s projected growth of 4.9 per cent. According to researcher Jayant Mukhopadhyaya from the International Council of Clean Transportation, the development of the aviation infrastructure in India will have significant economic benefits and improve the quality of life for many individuals who currently face challenges with poor road infrastructure and slow trains.

Prime Minister Narendra Modi has expressed his desire to transform India into a global hub for connectivity and a sought-after destination for both tourists and businesses. One of the items on his agenda is connecting smaller cities through air travel.

Air India, owned by the Tata Group, the country’s largest conglomerate, has made a request for 470 aircraft. Meanwhile, IndiGo, the top airline in the country, is anticipated to place an even bigger order. Additionally, other airlines are also increasing the number of planes in their fleets.

MORE ACQUISITIONS

India is striving to narrow the gap with larger aviation markets such as China through its recent acquisitions. According to Cirium’s data, the third-largest economy in Asia has placed orders for over 1,400 aircraft, which includes letters of intent (LoIs) that are not as firm as direct purchases. This number is nearly twice as much as China’s aircraft orders. In contrast, China aims to increase its number of airports to 450 by 2035 while currently operating a larger fleet than India.

India is witnessing significant progress in airport development projects with notable contributions from such companies as the Adani Group and Zurich Airport International AG. Adani Group’s airport in Navi Mumbai, spread over 2,866 acres, is expected to cater to around 90 million passengers by 2036. Similarly, a new airport facility in New Delhi is also under development by Zurich Airport International AG, with a projected capacity of 70 million travellers. Additionally, greenfield airports are being planned in various Indian states, including Karnataka, Gujarat and Andhra Pradesh.

POLLUTION COSTS

According to certain professionals, big infrastructure schemes could contribute to air pollution in India. A report by Dalberg Advisors reveals that this pollution results in a $95-billion loss in GDP for the country. This emphasizes the conflict between Modi’s ambition of transforming India into a developed nation within a quarter of a century and his objective of achieving net zero emissions by 2070.

Lewis Burroughs, aviation manager at ICF International Inc. (ICFI) based in Virginia, says India has set highly ambitious targets for the aviation sector. However, achieving those goals will lead to a rise in emissions. Burroughs also states that until significant technological advancements occur, the correlation between the two will remain strong.

India aims to create over 90 carbon-neutral airports by 2024, which is a challenging task since only two airports -- located in New Delhi and Kochi -- are currently carbon-neutral.

Debi Goenka, the founder of the Conservation Action Trust, has raised concerns about the environmental impact of ongoing projects near Mumbai and Delhi. To minimize such impacts, selecting sites for these projects carefully is important.

A GROWTH FOCUS

PM Modi's emphasis on economic progress and his goal of achieving a GDP of $5 trillion by 2025 mean that aviation will remain a key area of focus for him. According to the Centre for Economics and Business Research, India is expected to become a $10 trillion economy by 2035. Therefore, the aviation industry’s significance is likely to increase in the coming years.

In January, local air traffic rose by 96% and reached the same level as before the pandemic in 2019, according to the Directorate-General of Civil Aviation. As tensions between the US and China escalate, India is becoming an attractive alternative for manufacturers seeking to relocate from China. In addition to domestic growth, such companies as Foxconn Technology Group, which partners with Apple Inc., are now establishing manufacturing facilities in India, creating many job opportunities.

With the surge in travel demand, India requires improved airports with greater capacity. According to Goenka, due to the size of India, it is necessary to construct additional airports to redirect traffic to various locations instead of relying on existing airports that are already overwhelmed.

The author is a Defence and Aerospace Expert

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