The Adani Group aspires to take its recently started airport business to the top position in India and make its presence felt in the global market in five years. The question is whether its ambitions will lead to a monopoly in Indian aviation.
Adani Enterprises entered the Indian airport space in February 2019, when it won contracts to operate and manage six airports – Ahmedabad, Guwahati, Jaipur, Lucknow, Mangalore and Thiruvananthapuram – for the next 50 years. Apart from running these airports, Adani will upgrade and develop additional airside terminals, cityside infrastructure and landside infrastructure of airports operated by the state-owned Airports Authority of India.
Additionally, Adani Enterprises took over the Mumbai and upcoming Navi Mumbai airports from the GVK Group earlier in 2021. It now manages seven operational airports and one greenfield airport.
Before the Adani Group’s entry, which created ripples, the major private companies in the sector were GMR Group, which manages the Delhi, Hyderabad and under-construction Mopa (Goa) airports, Zurich Airport (which is developing the Jewar airport near Noida) and Fairfax (Bengaluru airport). The GVK Group exited after losing Mumbai and Navi Mumbai airports to Adani.
According to part of its detailed plans for the sector discussed by Adani Airport Group CEO Ben Zandi at a CAPA Live event in May, the company is focussed on three broad areas: consolidating operations, increasing non-aeronautical revenue, and switching to the use of clean energy.
“We have created a centralised airports operation control centre in Mumbai that has the capacity of operating 15 airports,” he said. “When we take over airports, our standardisation and centralisation become automated and we don’t have to recreate the wheel.”
According to a former senior AAI official, this won’t be a problem for Adani because the official who set up AAI’s system of managing airports has joined the group.
Adani Group’s wish list includes operating its airports only on renewable and sustainable green energy by next summer.
“All its assets will be independent with green and renewable energy,” Zandi said.
Adani Enterprises owns “a transmission business, a gas business, a solar energy business as well as power. We are going to take the combination of all of our sources of energy and create a sustainable, renewable microgrid energy source for all of our airports,” he said.
The dream was to have zero parking and aeronautical charges for airlines by 2025. The group also aims to get 70 percent of its revenue from all assets from non-aeronautical streams by 2025.
“We have created a collaboration with all our concessionaires on the non-aeronautical side. We have mandated the Adani point-of-sale system. We mandate this cash register system for all our vendors on the non-aeronautical side, creating a database which can be converted into consumer segmentation, consumer profiling and analytics and we can customise more, we can provide more conveniences, provide more control in the hands of the consumers,” Zandi said.
Further, the group plans to create a terminal plaza to tap travellers and airport visitors.
“We want to create the perception that our industry is responding to the voice of the audience, our industry is collaborating to make sure that everyone is safe and we are meeting and exceeding their expectations,” Zandi said.
Risk of monopoly
With such elaborate plans and given that the government plans to privatise 50 AAI-run airports in the next five years, some of which may be won by the Adani Group, is there a danger of a monopoly arising in India’s airport space?
According to Sharad Gambhir, manager of global consulting and technology services provider ICF, it’s up to the government to take steps to prevent monopolies.
“While promising better infrastructure and traveller experience, privatisation of Indian airports using the current method could lead to a few large airport operators, thus reducing the bargaining power of other stakeholders,” Gambhir said. “The authorities must now promote competition by capping the number of airports that can be granted to a single operator, regardless of the bid amounts.”
Moneycontrol reached out to officials at the Competition Commission of India for its comments, but none responded. The Airport Economic Regulatory Authority, which looks after financial aspects like determining airport charges, did not respond.
A study by ICF showed that if the Adani Group had owned the seven brownfield airports, including Mumbai, in FY19, it would have handled a quarter of India’s airport traffic – just behind GMR. With Navi Mumbai airport set to become operational in the near future, the Adani Group will likely become the largest player in the Indian airport space, the study added.
Nripendra Singh, research director for aerospace & defence practice at Frost & Sullivan, maintains that a monopoly has always existed in airports, but was quick to add that an unchecked monopoly is harmful for consumers, suppliers and the market. According to him, there have been several instances of a monopoly leading to a deterioration of services.
However, Singh added that the Adani Group won these airports fair and square.
“One must remember that the Adani Group won through competitive bidding and the validity of the tender shouldn’t be questioned. The group was ready to spend the highest amount of money on a per-passenger basis for the regulator,” he said.
On the Adani Group’s plan to integrate its airport operations, Singh said that over the next 10 years, total airport management (TAM) is expected to become increasingly popular.
“Not only does it help reduce operational costs and dependence on the workforce, it directly impacts revenue. It leads to increased efficiency and effectiveness across an airport. TAM allows for seamless integration of various operations by interlinking processes and systems across the airport. It gives the airport operator the ability to manage everything from a central location,” Singh said.
Jagannarayan Padmanabhan, director & practice leader for transport and logistics at CRISIL, said he does not expect a monopoly in Indian airports. He pointed out that about 70 percent of India’s airport capacity and passenger traffic are handled by three private players – GMR, Fairfax and Zurich Airport.
“The competition will be among these players to get better traction in their airports and also to bid for select airports in the second set of airports which will come up for bidding. Considering the COVID overhang, we can expect the situation to continue for the medium term,” he said.
He said that driving better revenue, enhanced customer experience and having a sharp focus on costs will push developers to adopt digitisation and larger integration with cityside developments.
VP Agarwal, former chairman of AAI, said that while Zurich Airport is a new entrant in India’s airport space, it will stay and GMR is a stable group.
“I do not think there will be a monopoly. However, the Adanis will be a major player. I see more greenfield airports coming up involving heavy investments where pension funds from Europe, the US and Canada will play a major role. Let us see how the future unfolds,” Agarwal said.
The Adani Group’s venture into airports has had some hiccups. The group has reportedly written to the AAI seeking to postpone its takeover of Jaipur, Guwahati and Thiruvananthapuram airports by about six months. The reason cited was the disruptions caused by the second wave of COVID-19.
Earlier in June, the Adani Group withdrew a 10-fold increase in charges for non-scheduled operators by the ground-handling company at Lucknow airport. The agency had revised the charges without informing Adani Airports and getting its consent and without following the approval process, the Adani Group said in a statement to a leading English business news daily.