Private airport operators hit crude pocket

By Shivani Muthanna, CNBC-TV18:

High crude prices have not just left airlines bleeding. Private airport operators are also bearing the brunt. Companies like GMR and GVK are drastically reducing their estimated airport revenues.

Gautam Hari Singhania, Chairman and MD, Raymond, said, “I just came back from the airport and it is empty! It is quite scary."

Also scared by the empty airports are the companies that run them. GVK, which runs the Mumbai Airport fears it will be short of its revenue targets this year. When it took charge of the airport in 2005, air traffic was expected to grow at 25-30% every year. But this year it has only grown 8%. The reason is that higher fuel prices have forced airlines to increase their airfares and that has led to fewer fliers. Fewer travelers have caused airlines to reduce flight frequencies by around 15-20%.

Isaac George, CFO, GVK said, “Going by the budget we have prepared within the company, we should touch a revenue of Rs 1,000 crore. Now that has got to be adjusted for any material reduction in traffic growth."

The worst hit companies are GMR and BIAL, which have just opened the new Hyderabad and Bangalore airports. For them, their very first quarter of operations has been a complete washout. Fewer passengers mean lesser revenues generated from non-aeronautical avenues like parking tickets, food and beverage and duty free sales.

Isaac George, CFO, GVK said that they would have lower income due to lower passenger spend.

Mumbai airport forms nearly half of GVK’s value. For GMR too, airport operations and related real estate development formed 48% of its net present value. But now all that is expected to be revised downwards.

So it’s not just airlines that are praying for lower crude prices. The companies that run airports too have been hit just as hard. They say that unless the ticket prices come down soon and more people fly, their entire business model could be under threat.