Adani Group (1) is all set to become the largest airport operator in India. Earlier this month, it has signed a deal to operate the Mumbai airport, the second largest airport in India, and Navi Mumbai airport, which is currently under construction.
Adani group already has a 50-year lease to operate airports in Ahmedabad, Mangaluru, Lucknow, Guwahati, Thiruvananthapuram, and Jaipur. Notably, these airports, including Mumbai airport has handled nearly 80 million passengers in 2019 and 2020. It is a quarter of the total air traffic of India, about 341 million.
According to the annual report 2019-200 of Adani Group, the group has ventured into the sector to transform India’s aviation sector. Hence, Adani’s growing dominance may only be the beginning of its play in airports’ operations segments.
The business model of the group allows a hybrid revenue. It means that it earns from the cargo, ground handling, housing, parking, aircraft fueling, and other airport-related activities. Simultaneously, it also generates income from non-aero functions like retail licenses, duty-free shops, parking space, parking space, development rights on adjacent airport lands, etc.
Challenges Ahead for Adani Group
The COVID-19 pandemic has severely impacted the aviation sector if India. For nearly two months, the Indian airlines were grounded entirely, starting from March 25. Even though the air travel opened back again in May, passenger traffic has not gone back to the pre-pandemic level.
Given the situation, the group may delay the takeover of Jaipur and Guwahati airports. The group successfully bid for these airports in 2019. As per reports, the group has also sought more time from AAI, Airports Authority of India, for taking over Ahmedabad, Lucknow, and Mangaluru airports.
There have been several changes since the pandemic in the market dynamic of transportation and logistic businesses. Even after signing agreements, the deals are far off from financial closures and transferring money. As a result, asset buyers are now attempting to reopen the contracts and negotiate the terms, stated MD and CEO of Centrum Infrastructure Advisory, Sandeep Upadhyay.
Besides the economic challenges, the Adami Group is also under a legal battle with Kerala State Industrial Corporation. It has challenged the Adani’s 50-year lease grant to operate Thiruvananthapuram airport.