Adani Airports has been in the news for multiple reasons, from hooligans trying to destroy the Adani branding at Mumbai airport to political heat for bagging six airports under the privatisation process. Be that as it may, the group has started to think about where its airport portfolio will be headed in the next couple of years.
Earlier this month, Adani enterprises declared its Q1 FY22 results, which saw attributable profits increase by 8 times to Rs 271 crore YoY. Adani enterprises is the holding company for the airports division. The company lists the airport business as a “Developing business”. It outlined achievements such as completing its acquisition of Mumbai International Airport Ltd and handling 3.5 million passengers across four airports during the quarter, which turned out to be one of the worst ever for Indian aviation.
Read: As Adani's airport ambitions soar, rising risks of monopoly surface
What is the plan?
The group seems to be getting its house in order and has appointed former MIAL CEO Rajiv Jain as the group CEO. Over the last few years, the airports arm has seen a churn at the top, even before the group could start operating some of the airports it had bid for and won. Currently Adani has four airports in its portfolio and expects to include another three by Q3 FY22. The group has won concessions for Jaipur, Thiruvananthapuram and Guwahati airports and is yet to take over.
For the first time, the group seems to have put a strategy in place. The strategy is two pronged — first for International to domestic traffic and vice versa, and second for domestic to domestic connections.
While the hub-and-spoke model is traditionally associated with airlines, Adani Airports seems to be making a beeline for this concept to utilise Mumbai, the second-largest airport in the country, as a hub to connect other airports in its portfolio, along with Ahmedabad.
International to domestic and vice versa
The airport operator wants to pitch Mumbai and Ahmedabad as a hub to connect West Asia, Europe and the Far East and channel them to other domestic destinations already connected from these airports. While Mumbai has a heavy presence of West Asian and European flights, the Far East is not well connected to the city and there are hardly any flights between Ahmedabad and that corner of the world. Restrictive bilateral agreements also mean that Ahmedabad does not have significant capacity either to Europe or West Asia.
Given the lack of slots at both these airports and with no land to expand, a change is unlikely to take place immediately.
Domestic to domestid connections
Adani also seems to be envisioning using Mumbai and Ahmedabad as hubs to connect other group airports with each other. However, while Mangaluru and Thiruvananthapuram to Lucknow or Jaipur via Mumbai makes sense, not all combinations make sense.
The real challenge again will be slots and airlines that prefer to fly to their own airports over others when it comes to adding flights. The airport will have to dole out incentives to attract carriers since other airports, including Bengaluru and Hyderabad, have also been trying for such network priorities.
Will the airside and landside strategy make a difference?
Adani airports wants to make the most of both airside and landside on offer. The group has been talking about long-term airline partnerships, optimising slot priorities and minimising turnarounds. This will also be fuelled by additional retail space, where revenue is a mix of rental space and a percentage of sales, making the proposition more lucrative.
Moving away from government tender-based rights for advertisements to aggressively chase advertisers will also help shore up non-aero revenue.
Tail Note
The concession period is rather a long one and we will be able to see if the Adani group can ensure bilateral amendments are formulated in such a manner that lucrative international traffic can be handled at the group’s airports.
While Q1 FY22 revenue was Rs 107 crore, with an EBITDA loss of Rs 11 crore, this was the worst quarter to operate for anybody in the airports and airline business in India. As traffic picks up, we will know how much the company's strategy has translated into business for the airports in the current quarter.
The upcoming terminals at Jaipur and Lucknow will be key for the group's expansion plans and the hub-and-spoke model might just be a long shot move by the strategy team. It will be a first if Adani manages to make this work but then no other private group has had as many airports under its belt until now!
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