Skip to navigationSkip to content

Will Adani’s newly created aviation empire survive the pandemic?

Time for a new strategy.
  • Niharika Sharma
By Niharika Sharma

Reporter based in New Delhi.

Published Last updated This article is more than 2 years old.

Adani Group, headed by billionaire Gautam Adani, is all set to establish itself as India’s largest airport operator—just two years after entering the space.

Earlier this month, the group signed a deal to operate the Mumbai airport, the second largest in India, and the under-construction Navi Mumbai airport near the country’s financial capital.

The group already has 50-year leases to operate the airports in Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati, and Thiruvananthapuram. Collectively, these six airports along with the Mumbai airport, handled close to 80 million passengers in 2019-2020, which is approximately a quarter of India’s total air traffic of 341 million.

Adani’s growing dominance

If the group’s vision is anything to go by, this might just be the beginning of its play in the airport operations segment. “Adani Group has ventured into the airports’ sector with a commitment to transform the Indian aviation sector,” it said in its annual report for 2019-20 (pdf).

The group has a business model that assures “hybrid revenue,” which means it earns from airport-related activities such as cargo and ground handling, parking, and housing, and aircraft fuelling, and also non-aero functions such as income from duty-free shops, retail licences, advertising, parking space, and development rights on land adjacent to the airport. “…we plan to develop Airport Villages that can tap into the ‘non-passenger airport visitors’,” Adani Group’s annual report said.

 Experts think that the rising number of acquisitions by the Adani group is good news for the country’s aviation infra sector.

“We are now witnessing heightened activity in the sector owing to Adani Groups participation, which is definitely good for the overall growth and development of the industry,” said Ashish K Nainan, an expert on the sector at financial firm Anand Rathi Group.

However, regardless of the rapid rise to power, the 58-year old Indian billionaire’s flight will not be free of turbulence.

Adani’s aviation challenges

The Covid-19 pandemic has beaten India’s aviation sector black and blue.

Airlines in the country were completely grounded for nearly two months starting March 25 when the Narendra Modi government announced a nationwide lockdown and sealed international borders to arrest the spread of coronavirus. Even as air travel reopened in May, passenger traffic hasn’t gone back to normal.

Given the slump, the group reportedly may delay the takeover of Guwahati and Jaipur airports, which it successfully bid for the last year. It has also sought more time from the Airports Authority of India  (AAI) to take over Lucknow, Mangalore, and Ahmedabad airports citing uncertainty in the airport business following the pandemic, according to a report in Mint newspaper.

“The market dynamics and prospects for businesses in transport and logistics have changed a lot since the pandemic struck…In deals where the agreement has been signed but they’re still a while away from financial closure and transferring money, assets buyers are trying to open up contracts to renegotiate terms,” Sandeep Upadhyay, managing director and CEO of Centrum Infrastructure Advisory, told Mint.

Besides macro-economic issues, the Adani Group is facing a legal battle with Kerala State Industrial Corporation, which has challenged the 50-year lease granted to operate the 88-year-old Thiruvananthapuram airport.

In addition, there have been accusations that Adani’s close proximity to prime minister Narendra Modi is the reason behind its bids getting approval. Opposition parties have time and again opposed Adani’s bids and accusing the Modi government of favouritism, while some have voiced concerns about a likely monopoly emerging.

Experts, however, believe that the airport operations space is far from being monopolistic as of now. As per Nainan, there isn’t a threat of monopoly as of yet given the entry of a new global entrant, Zurich International AG, who has won the bid for Jewar Airport near Noida, and the presence of existing private players like the GMR and GVK groups.

📬 Kick off each morning with coffee and the Daily Brief (BYO coffee).

By providing your email, you agree to the Quartz Privacy Policy.