Mar 19, 2023
India to Splurge $12 Billion on Airports as Travel Rebounds
(Bloomberg) -- India will spend about 980 billion rupees ($12 billion) over the next two years on airports, with airline orders for hundreds of new planes to meet resurgent travel demand putting pressure on existing infrastructure.
The world’s fastest-growing aviation market aims to boost the number of airports to 220 by 2025 from the current 148, for which private builders will invest about $9 billion and state-run Airports Authority of India will bring the rest. It involves greenfield projects, new terminals and the renovation of existing facilities, including former military airfields left over from colonial times.
Though the entire country of 1.42 billion people has a fleet of only some 700 aircraft — United Airlines flies more — existing airports in major cities such as Delhi and Mumbai are running out of parking and landing slots.
The move comes as India asserts itself more broadly on the global stage, buoyed by a rising consumer base and growth in the $3.2 trillion economy on track to exceed China’s. The country has already been making its mark in aviation, with Air India Ltd. last month announcing the biggest deal in commercial aviation history. Boeing and Airbus SE have been sourcing parts from India for years.
India wants to be a powerhouse in air transport, according to Civil Aviation Minister Jyotiraditya Scindia, who kicks off the three-day CAPA India Aviation Summit Monday. Boeing forecasts India’s passenger traffic will grow at a rate of nearly 7% annually, compared with 4.9% in China from 2022 through 2041.
“The growth in aviation infrastructure will bring a huge amount of economic upside and new airports will improve the quality of life for most people partly because of bad road infrastructure and slow trains in India,” said Jayant Mukhopadhaya, researcher at the International Council of Clean Transportation.
Prime Minister Narendra Modi wants to make India a world-class connecting hub as well as a destination for tourists and businesses. Linking smaller cities by air is part of his development agenda.
Air India, owned by the nation’s largest conglomerate Tata Group, has ordered 470 aircraft, while IndiGo, the nation’s No. 1 airline, is expected to place a larger order. Others are beefing up their fleets as well.
With the new acquisitions, India is trying to catch up with bigger aviation markets like China. Data from Cirium shows that Asia’s third-largest economy has more than 1,400 aircraft on order, including letters of intent that are less firm than outright purchase. That’s almost twice as many as in China, which, meanwhile, seeks to almost double its airports to 450 by 2035. China currently operates a significantly larger fleet than India.
Major airport developments in India include Adani Group’s 2,866-acre airport in Navi Mumbai that will handle 90 million passengers by 2036. Capital New Delhi will also see a new facility with a final capacity of 70 million travelers and it’s being developed by Zurich Airport International AG. Other greenfield airports will come up in the states of Karnataka, Gujarat and Andhra Pradesh.
Some experts say such large-scale infrastructure projects could add to India’s air pollution, which according to a report by Dalberg Advisors, costs the country $95 billion in GDP annually. That underscores the tension between Modi’s aim to make India a developed nation in the next 25 years and his goal of reaching net zero by 2070.
“Few nations have such ambitious goals for the aviation sector as India, and achieving those goals will come with an increase in emissions,” said Lewis Burroughs, aviation manager at Virgina-based ICF International Inc. “Until major technological changes occur, the two will be heavily linked.”
India wants to have more than 90 carbon-neutral airports by 2024, a difficult challenge considering only two such airports exist now, in New Delhi and the southern port city of Kochi.
The ongoing projects near Mumbai and Delhi have already faced backlash over environmental concerns. Sites should be selected in a way that minimizes the environmental and ecological impacts, said Conservation Action Trust Founder Debi Goenka.
Representatives for the two facilities under construction said their plan is to cut emission by using renewable sources of power and electric vehicles.
But given Modi’s focus on growth — he is targeting GDP of $5 trillion by 2025 — aviation will continue to be high on his priority list. The Centre for Economics and Business Research predicts India to become a $10 trillion economy by 2035.
Local air traffic surged 96% in January, matching the 2019 pre-pandemic level, according to the Directorate General of Civil Aviation.
Besides the domestic rebound, India is also emerging as one of the preferred locations for manufacturers looking to shift away from China as tensions between Washington and Beijing grow. More businesses such as Apple Inc. partner Foxconn Technology Group are setting up factories, creating hundreds of thousands of jobs in India. That means the nation needs better airports with enhanced capacity as travel demand surges.
“India is a large country and we definitely need more airports to divert traffic directly to different locations rather than funneling them to our already over-burdened airports,” said Goenka.
--With assistance from Angus Whitley and Danny Lee.
©2023 Bloomberg L.P.