Airports fly high on non-aero revenue

The share of non-aeronautical earnings in airports’ total revenue is swelling as crashing air traffic movements (ATMs) crimps their aeronautical revenue and income generation from non-airline business goes up.

Aeronautical charges are directly related to airport infrastructure and levied for the use of an airport’s runway, apron and terminal facilities by passengers, while non-aeronautical income is earned through rentals from commercial outlets or concessionaires within airport terminals and from passengers.

Last quarter saw the three major Indian airports — Mumbai, Delhi and Hyderabad — increase their revenues from commercial rentals, advertising on their premises, parking fee and other such services.

This pushed up the percentage of Mumbai International Airport Ltd’s (MIAL) and Delhi International Airport Ltd’s (DIAL) non-aeronautical revenue by 10 percentage points to 39% and 65% in the June quarter this year from 29% and 55% respectively last year.

Hyderabad airport, which began operation in March last year, has also seen its non-aeronautical revenues jump to 44% of its total revenues in the same quarter. It was negligible a year back.

Kapil Kaul, chief executive officer (CEO) of Centre for Asia Pacific Aviation-India and Middle East, said the recent spurt in non-aeronautical earnings was mainly because such a revenue stream has now been inbuilt in the business model of new and modernised airports.

“Earlier, duty-free and domestic retailing, food and beverages and such services did not exist at airports. Today, airports are leveraging these avenues of revenues. It will go up further in coming times to reach the international benchmark of over 70%,” he said.
Higher non-aeronautical revenue helps airports reduce dependence on income from airport charges, which can fluctuate with the swings in the ATMs. It also cross subsidises airport charges, making them competitive for airlines.

Over the last one year, airports have been witnessing drops in the ATMs, with airlines cutting back capacity to tune it air passenger traffic growth. According to the latest data put out by Airports Authority of India (AAI), total ATMs in May were down 4.6% year-on-year, while passenger traffic slipped 3.2%.

This is forcing airports to aggressively look at non-aeronautical revenues. For MIAL, the major contributor to this segment of income was vehicle parking, followed by duty-free retailing.

“In the duty-free retailing, we saw brisk sale of tobacco and liquor products. We also earned from selling advertisement rights at our premises,” said a senior MIAL official, who did not want to be named.

The Mumbai airport currently has 38 counters at the domestic and international terminals, including airline lounges, duty-free retail outlets and food counters.

An analyst said with retailing at airports picking up, rentals for commercial space were slowing climbing up and this was further boosting non-aeronautical revenues.

“Airports are renegotiating rentals upwards when contracts are coming up for renewals,” he said.