Crowded Skies – A statistical case for privatization of Indian Airports

On February 1st, 2006 the Indian Government approved the privatization plans for the Delhi and Mumbai airports after years of lip service by numerous governments in power. GMR Industries and Frankfurt airport operator Fraport will modernise Delhi airport while the GVK group and its South African partner has won Mumbai. They will be offered 74% stakes in the airports while the state-controlled Airports Authority of India will retain a 26% stake. The plan is bitterly opposed by trade unions and the government’s communist allies.

The Indian airports are in a critical state with poor infrastructure that is unable to cope with the projected growth. No Indian airports have more than a single runaway and are unable to handle the new generation of civilian aircrafts such as the wide-bodied A380. Ground facilities are insufficient to process the current passenger volume. Air Traffic Control is unable to cope with the traffic and delays are common place. To make things worse India is facing its first shortage of pilots or traffic controllers.

To harness how important the privatization of Indian airports was, a Rediff article, “Indian airports grounded by poor infrastructure” carries some astounding numbers. Here is a synopsis:

Human traffic that passed through the Indian Airports:

2004-2005 @ 60 million (a growth of 21% over 2003-04)

April-October 2005 traffic grew another 19% i.e. 38.5 million check-ins.

Analysts expect growth at a CARG of 25% over the next five years.

Number of Airlines operating Daily:

Indian (was Indian Airlines) operates over 300 daily flights.

Even Air India operates over 200 flights per week from Indian cities

Jet operates 290 and its new acquisition, Sahara, another 250 approx.

Kingfisher has approx. 100 daily flights and

Air Deccan has 200 while

SpiceJet has around 40.

(Air India Express, the low-cost subsidiary, operates another 38 flights/week)

New Aircraft orders in 2005:

Air India put down $8 billion on 68 new Boeings.

Indian has ordered 43 Airbuses.

Air Deccan will expand to 30 aircraft

SpiceJet plans to induct 20 new Boeing 737-800s.

Kingfisher has announced the purchase of 30 Airbus A320s and 20 ATR 72-500s.

In addition, half-a-dozen airline IPOs are in the pipeline for 2006-07 and Indian and Air India could finally see disinvestment as well.