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Sun 9 Feb 2020 02:36 PM

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India's plan to build 100 new airports set to spur Gulf passenger, cargo growth

Dubai and Abu Dhabi are two major transit points for Indian travellers for their onward journey to Europe, UK, US and beyond.

India's plan to build 100 new airports set to spur Gulf passenger, cargo growth

Industry experts said the proposed airport infrastructure expansion, along with the government's budget decision to make investments by international sovereign funds in India’s infrastructure sector exempt from all taxes, could attract increased foreign investments in the airport sector.


India has unveiled plans to construct 100 greenfield airports by 2024 to expand its air connectivity network within the country, aimed at boosting air passenger and cargo traffic on the international and domestic routes in the coming years, as well as triggering investment requirements running into billions of dollars.

The massive airport infrastructure expansion plans have led many aviation industry experts and analysts to predict a big jump in air passenger traffic in the international route, especially on the India-Gulf sector, the busiest and most sought after international route from India, leading to increased competition among airlines in this sector.

“India will be embarking on the next phase of growth in air travel, with the Union Budget 2020 announcing a massive expansion plan in the country’s airport infrastructure,” Dhiraj Mathur, aviation sector expert and former Partner, PwC India, told Arabian Business.

“Air passenger traffic in India has more than doubled in the last decade, and the coming decade could see even higher growth considering the recent trend of robust air passenger growth and outward tourism from India,” Mathur added.

India has seen five years of double digit growth in air passenger traffic till FY19. The growth rate, however, is expected to come down to about 4.5 percent in FY20, according to projections made by rating agency ICRA.

“FY20 is also expected to witness a muted domestic capacity growth of about 3 percent, as two of India’s budget carriers - Indigo and Go Air – need to resolve their engine issues and another one, SpiceJet, waits for clearance of the B737 Max aircraft,” the latest ICRA report on the aviation sector said.

“Many Indian airlines are focusing on expanding on the international routes now,” says Kinjal Shah, aviation sector analyst and vice president with ICRA, adding that the proposed airport expansion could give a further boost to this.

Focus on international routes

Recent reports about plans of Indian full service carrier Vistara – a joint venture between the Tata Group and Singapore Airlines – to order more Boeing 787 Dreamliner jets is an indication of Indian carriers’ focus on expanding on their international routes.

Upgrades to existing airports to international airports, as well as adding new airports, will also help many Gulf-based airlines to expand their India operations by connecting to more Indian cities.

Dubai and Abu Dhabi are two major transit points for Indian travellers for their onward journey to Europe, UK, US and beyond. 

“The new airport construction plans will have a multiplier effect for the sector, as the network expansion will trigger significant growth in the operations as well as air passenger traffic growth in the existing airport network in a state,” Harsh Jagnani, a former airport sector analyst with ICRA, has told Arabian Business.

“The India-Middle East sector will be the biggest beneficiary of the expected air passenger traffic from India, the sector being the busiest among the international routes from India,” Jagnani said.

Industry experts said the proposed airport infrastructure expansion, along with the government's budget decision to make investments by international sovereign funds in India’s infrastructure sector exempt from all taxes, could attract increased foreign investments in the airport sector.

“This will offer overseas sovereign wealth funds such as Abu Dhabi Investment Authority (ADIA) a good opportunity to earn higher returns for their infrastructure sector investments in India,” M R Rajaram, a financial sector consultant, has said.

Jagnani, however, said the Indian government will have to come up with strategy measures such as simultaneous plans to develop some places as tourist destinations or export hubs to make many of the proposed and existing airports highly commercially viable to attract foreign investments in the sector.

Though separate investment figures are not mentioned in the Indian budget, industry experts estimate construction of 100 new airports to cost $15 - $20 billion.

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