Delhi airport is making money, but not in the way you would imagine
Costlier finances and depreciation costs are causing losses, but the GMR Airport-operated airport is generating revenues mostly from non-aero verticals.
The capital’s Indira Gandhi International Airport is the largest airport in India by passengers—both domestic and international. Operated by Delhi International Airport Limited, owned by GMR Airports which has investments from Groupe ADP has been at the receiving end during the fog period.
The airport declared a loss of INR 127.7 crore for the October to December quarter (Q3 - FY24) on the back of a total income of INR 1322.9 crore rupees recording an operational profit of INR 409.9 crore but seeing higher finance and depreciation costs leading to the loss.
The star of the income was non-aero revenue, which stood INR 759.7 crore. This is 57.4% of the total income of the airport in the last quarter. The income is higher by 8% compared to the previous quarter and 12.5% higher than Q3-FY23. The non-aero income is 2.8 times the aero income of the airport, underscoring the importance of the “mall in an airport” concept.
The aero revenue grew 7.2% sequentially and stood at INR 269.9 crores. The aero revenue typically comprises airline terminal space rentals, airline landing fees, and usage fees for terminals, gates, services, and the User Development Fee. The non-aero revenue comprises Rentals, retail, food & beverage, duty-free shops, advertising and car parks.
The big numbers
The air traffic at Delhi airport was up 8.5% YoY and stood at 18.8 million passengers. An increase in passenger traffic resulted in an increase in spending on retail, food and beverages amongst others. The non-aero revenue was up 13% YoY which included the Retail and Duty free segment which has grown 11% YoY.
The airport also earns revenue from the rentals in Aerocity, which were up 39% and stood at INR 195.6 crore in the last quarter.
For nine months ending December, Delhi recorded a non-aero revenue of 21.7 billion rupees and 28% of those came via Retail and 19% came from space rentals. Over 1.5 billion rupees came from advertising.
The duty-free spending per passenger stood at INR 1005 for the nine months ending December 2023. The non-aero income per passenger stood at INR 360 for Delhi and Hyderabad airports. The GMR group has not reported separate per-passenger income for Delhi.
Airport as a mall
Pushing up non-aero revenue is a standard practice with airports worldwide, which are large capital-intensive projects. The airport developer looks at the non-aero business, city-side development and long-term concessions as the revenue which recovers its development cost. Globally, the non-aero revenue stands around 40% as per the ACI Airport economics report released in 2019.
Delhi has a much higher share of non-aero revenue as compared to the aero revenue. Singapore's Changi airport has roughly 55% of its revenue coming from non-aero sources.
The first phase of privatisation of airports in India has seen the usage of a revenue-sharing model where a percentage of total revenue is shared with the Airports Authority of India. The higher revenues also help AAI gain, which is then deployed to develop smaller airports or operationalise airports hitherto not in use. The later phase of privatisation which was conducted just before the onset of COVID, saw the model shift to a per-passenger amount to be shared.
Concept fraught with risks, but…
As Delhi got engulfed in fog this season, the airport along with the airlines were at the receiving end with complaints of lack of facilities and demands to have more waiting and sitting areas instead of shops and restaurants. This is not the first time that the airport has been criticised for this reason. Last year when airports were congested and there were long queues for security checks, passengers had taken to social media with similar complaints.
These two issues are unrelated. The airport can be a mall and also have ample seating and security lines. It need not come as either this or that as an option. Large airports across the world and especially hubs have large retail, duty-free and food and beverage selections. Singapore Changi or Dubai are no exceptions to this and as Delhi tries to get into this league the airport should in fact invest more in attracting global brands in retail and food to make the transit more attractive. While Singapore Changi airport has a jewel, a butterfly park and many such attractions, Dubai is known for its duty-free.
The attractiveness cannot just be cost and connection time but the airport experience and the only way forward is more retail, food and beverages and duty-free without compromising on service standards for security checks, check-in and waiting areas.
(Ameya Joshi is an aviation analyst).
Stay informed on Business Newsalong withGold Rates Today, India News and other related updates on Hindustan Times Website and APPs