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2026.10.05 | TB | Industrials | Indian Airport Infrastructure Outlook

原标题：Indian Airport Infrastructure – Traffic Growth, Capacity Expansion & Industry Outlook

#transport #industrials

Third Bridge · 2026-10-05

Analyst-led • 8 Sep 2026

Snehasish Dutta (SD) Chief Airports Officer at Reliance Infrastructure Ltd

Shahid Pathan (SP) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

SP [00:00:03]: Welcome to Third Bridge's Interview entitled Indian Airport Infrastructure – Traffic Growth, Capacity Expansion & Industry Outlook. I'm Shahid Pathan, and I'll be facilitating today's Interview with Mr Snehasish Dutta, Chief Airport Officer at Reliance Infrastructure Ltd.

Mr Snehasish, before we start today's Interview, please state I agree or I disagree to the following statement: You understand the definition of material non-public information and agree not to disclose any such information, or any other information, which is confidential, during this Interview.

SD [00:00:35]: I agree.

SP [00:00:36]: Could you begin with a brief introduction to your background?

SD [00:00:44]: Good evening, Shahid. It's good to be on this call. I am Dr Snehasish Dutta. I have been in the industry for about 28 years with automotive, aviation, aerospace. Last 10 years has been most with the aviation industry with largest players like Adani and Reliance. I have been heading the airports of Ahmedabad to some extent and later as Guwahati COO. Then I was handling the Head of the Business Excellence for aero, non-aero commercial activity, which was focused with all the Adani airports. Later, I shifted as the Chief Airports Officer or we call it as the CAO of the airports and I was also the Board Director for Reliance Dassault [Dassault Reliance Aerospace] Aviation and the Aerospace vertical of Reliance. That's briefly from my side. I hope we have a wonderful conversation ahead.

Questions

00:01:48] How do you expect the Indian airports industry to shape up in the medium term? What key trends and factors have you seen in FY27 that are expected to drive growth and change the industry’s dynamics going forwards?

SD [00:02:09]: Yes, that's an interesting question. In fact, I've been seeing the Indian airports shaping up in a large way to face the international diaspora both on the events on the outlook of an airport or rather, I will say, the way Indian air travellers experience the entire process of the journey. One, of course, I see the Indian airports are largely getting privatised, is a very positive sign, which I see growing up. Secondly, a lot of these airports are investing heavily into facilitations, capacity expansions, providing a lot of the international, I would say, the process management, I would say, digital environment, footfalls for both the passengers and the non-passengers as well and the entire ecosystem around the airport, which can be both for aerocity, non-aero commercial and so on and so forth. I will say the ecosystem is largely getting very positively motivated. One important factor, which is the primary goal is to see how the passengers are showing. I see both the domestic as well as international passengers in the last 4-5 years post the COVID has been very, very positive, encouraging, and that's what is driving the growth and hope it continues the way it is.

00:03:42] The August 2026 ICRA [Investment Information and Credit Rating Agency] report forecasts FY27 Indian airport passenger traffic growth at a sluggish 1-3%. Do you agree with this guidance? If so, how do you expect the industry to recalibrate its capacity investments and revenue models in light of the moderation we are expected to see?

SD [00:04:14]: I think the large part of the FY27 has been primarily being projected on basis of the availability of the aircraft. We have seen in the past that a lot of the aircraft or maybe the airlines had faced a lot of challenges, which has hindered the entire travel or the growth of the travel that was expected. If you see the previous years, we had a very solid growth YoY, which is both domestic as well as international. Most of the passenger traffic that we see in international, which is maybe 426 million or maybe projected to go around 450 million. That's largely driven by about 60-65% or 70% domestic travel. That has always been some words (ph 05.07) that I have been doing the analysis for about 4-5 years after COVID. I've always seen it going upwards of maybe 12-13%. In some subdued year, it was about 7% or 8%. I will largely say that 6-7% is an ideal way of seeing the passenger growth in the domestic sector. International should be about 13-14%, which was always there and I'm talking about the 30% pie of that out of the entire air travellers.

Maybe the current scenario is showing a slight subdued numbers, but I do not see that as any deterrent here because I see all the elements around both the domestic, international investments, growth of airports what guidelines the Ministry of Civil Aviation has issued, the efforts that are being done to increase the airline capacity, their fleets, which has been largely… A lot of them, I will say, they are not operational because of various other issues of engine or maintenance. I think all of these put together, the availability of convenience in the entire system has been subdued. Maybe that's the reason why the picture is slightly painted dull. I am very optimistic, and I'm looking forward to a large investments which are going to come across for the next 5-6 years. I see it is going to be both the passenger domestic to be upwards of at least 7-8%, international to be around 9-10%. That's a very optimistic way of looking forward for the next five years.

SP [00:06:57]: What I understand is that the growth is subdued due to the delays in the delivery of aircrafts. As that bottleneck gets removed, it is supposed to significantly contribute towards suppressing (talking over each other 07.10).

SD [00:07:09]: Yes. A lot of the existing aircrafts are also grounded for various maintenance and other issues. A lot of the upgrades on the software, particularly on the Boeing. It's on the cards, which is happening. As a result, the operational fleet, which is available for flying is slightly lesser than the total fleet, I'd say, almost 25-30% is down. That really creates an element where the availability of aircraft is an issue. I think most of the airlines are trying to cope up with the situation on engaging quickly or gearing up with new aircraft or more leased aircrafts to be in place or maybe repairing the existing one to ensure that the traffic is back to normal.

SP [00:07:09]: Despite high load factors, I think that is something that was a very contrasting thing that is happening. I think that explains it.

00:08:02] How much of the Indian airport passenger traffic growth do you expect to be driven by airline fleet additions vs higher aircraft utilisation going forwards?

SD [00:08:23]: As I said, the whole point, the investments which I had seen in the airports growth, and I'm talking of large new airports like Jewar, Navi Mumbai coming in or additional capacity, which is being built in Hyderabad or Bangalore. Now recently the airports are gearing up and the airport has to have passengers. Already these airports have been used to the capacity that it was built for. The new airlines are getting added, and this is going to create both the hub-and-spoke movement, which is basically tier 1 to tier 2. The airlines are also going to contribute further to the tier 2 to tier 3 city movements, which can be more on ATRs and lower aircrafts. Of course, one important element is a large part of these new airports are going to be the international hubs for a lot of transit passengers. Hence, the growth, I would say, at this moment, looks very subdued number, which I spoke some time back, it has much, much higher headroom. The moment we see the aircrafts in place, which is going to be a phenomenon for the next five years. This is going to slightly build up the capacity that I see with the current expectations of 430 million or 450 million, I'm sure it is going to add another 30% further traffic to both the domestic and the international skies.

00:10:05] As India targets substantial expansion in regional connectivity, including the planned development of 100 additional airports, how well do you think the expansion is currently aligned with increasing passenger demand? Do you anticipate a risk of a mismatch between demand and supply?

SD [00:10:25]: No. At this moment, of course, we do not have all the airports which are operational. In case some of them are operational, but it may not be licensed. When I say licensed, it is not for commercial use. There can be air strips, but not commercial use. Some of the airports may not be fit for night landing, which is basically an additional feature for any airport to add further to its navigation. I think at this moment, what we are looking is about 100-120 airports, which are operationally viable for every type of airports or aircrafts rather. Going forward, what I see that we are talking about 250 to 230 or 240 airports to be completely operational. The whole point when these fleets, which are being ordered, it comes in full-fledged, which is going to be, again, 10 years journey from now. That is going to really take up the skies. I'm seeing it from a perspective that maybe we'll have about 2,000 commercial aircrafts in the Indian skies. That is going to add real growth in the air passengers where we will have two things. (1) Of course, the existing commercial aircrafts, which are adding to the fleet. (2) The UDAN routes, which are going to be operational. Already we have 600-plus UDAN routes.

Furthermore, the Ministry of Civil Aviation is investing heavily on the airports or viability gap funding for the airlines and so on and so forth, which is going to catalyse the UDAN routes. Once the UDAN routes becomes operational, that means we are not talking of IndiGo or Air India here. We are talking of the smaller airlines. These airlines will become a great part of contribution to the entire air travels. That means maybe we are talking of connecting Nanded to Nagpur, something like that, or we are talking of connecting Mysore to Mangalore. We are not talking of Bangalore anymore. We are not talking of Bombay here. We are talking of tier 2 cities connecting to tier 3 cities. That's the real growth. If I have to see China, that's where it actually pulled up the growth, and that's where the economy is growing. It's very important. We see it from that perspective that where is actually the growth happening. The cities will always be crowded. It will always be challenged with the capacity. Hence, the real growth of the air connectivity is going to come from the tier 2 and tier 3 cities.

SP [00:13:20]: That's why I think the government is also placing more importance on regional connectivity and connecting tier 2 and 3 cities.

SD [00:13:34]: Absolutely.

00:13:37] As Indian carriers such as Air India and IndiGo are expected to take delivery of massive fleet orders over the next five years, how much of the new capacity do you think might be absorbed by tier 1 metro hubs vs emerging tier 2 and 3 regional airports? Is the duopoly we are seeing today in airline operators changing the operator-airline negotiating dynamics?

SD [00:14:06]: Yes, it is at this moment, one factor is, of course, there that we have two large players now occupying almost 90% of the entire pie. Just in one way, not a great balance here. At the same time, there are new airlines which are trying to eye the Indian skies. There are a lot of investments, I would say, almost it should be a pie of about another 8% or 10%. Largely, if I see, it will be a 75% is going to be ruled by large players and maybe 25% is left out for the smaller players. To answer your question, yes, at this moment, it will remain a dynamic where there has to be a regulator on the top who actually governs the aviation rather than airlines governing the aviation rules. That's (1). (2) There has to be both Ministry of Civil Aviation, state governments working together, which is for the interest passengers, that has to be the backbone of the entire growth. (3) The smaller airlines have to be taken care well because these are new investors. They are new to these skies.

They are, for example, Akasa Air has shaped up well. There are similar airlines which are coming up, and they need to be taken care well on the economics of the flying. That means there are a lot of support subsidies on fuel, supports on viability gap, supports on being a profitable organisation. That is where I think if the government can take care well for the next four or five years, I'm sure that is where you will see that more smaller players are emerging. As long as this is not happening, it will really be skewed towards the large players. That also opens up some of the large airline operators also who are eyeing the Indian sky. Maybe we see another one or two players coming in the next five years, they may take another share of chunk and they may be real big players trying to have an Indian base of the clients. That's going to be interesting in coming years.

00:16:34] Do you expect the new airlines that are in the pipeline today to come up as operators? Would they be targeting tier 2 and 3 city routes to capitalise and gain market share in the industry?

SD [00:16:52]: Yes, of course, this would be the game changer for them because any new airlines coming, it is not easy to go into Boeings or Airbuses immediately. They would like to go into the ATR, fleets, and smaller aircrafts. One, of course, the capacity that they can get from these aircrafts are that you need to have lesser number of seats filled, for example, from a 72 seats, even if you are 70% (inaudible 17.23) or 50 passengers that you can fly, you can still be viable on these routes. That's an interesting because instead of waiting an Airbus. Most of the airports, which are at the tier 2 and tier 3 are not going to take on the capacity both in the runway length or the width or the other facilities on the airport. It may not be fit for the large, or I'd say the…

SP [00:17:50]: Larger aircrafts.

SD [00:17:51]: Aircrafts for landing operations, etc, or parking. This may be fit for the smaller aircrafts to operate. Hence, I see that these smaller airlines, which will come in will be viable or I will say that their entire business model would be on the smaller airports and taking care of at least a 70% occupancy rate going forward, and that can be the way it can go forward with a lot of profitability, I would say.

00:18:24] Are there significant differences in airport handling and charges for an airline operator at a tier 2 or 3 airport compared to a major metro airport?

SD [00:18:44]: It is. At this moment, all the tariffs, what we call as far as landing and parking or night parking, etc, it's all defined by AERA. AERA governs the economic planning of the entire airlines. Abruptly, nobody can charge anything for anywhere. Of course, in a place like Mumbai or Bangalore or Delhi, it will always be higher. Of course, they are not same. It depends on the investment that has occurred into these airports over a period of time. What we call as the control period, that's a five-year control period based on which the investments by the airport operator or other such investments are accounted for based on which the economic regulator defines the tariff.

Naturally, in a smaller airport, the type of investments would be lower and hence, the tariff will also be lower. Certain cases like UDAN flights, they are exempted from these tariffs also currently. Going forward, I do not know how it would look like as a policy. At this moment, a lot of the subsidies are built around the UDAN flights so that landing or parking or certain passenger fees, what we call, in your ticket, for example, you have the development fee or a passenger service fees. Certain charges are now exempted in the ticket charges itself. Hence, these are the ways by which you can promote the air travel among the passengers, which we are talking of a tier 2 or tier 3 cities. I'm making it more of a, I will say, happy-to-go mode of transportation rather than trains or bus at this point.

SP [00:20:48]: Policy support and AERA guidelines are going to play a big role when it comes to…

SD [00:20:52]: Absolutely. Yes. It is already in place now. It is already operational.

SP [00:20:58]: I think I read something about Hyderabad Airport, where the ceiling was set a bit low compared to what GMR was expecting. That hurt their margins.

SD [00:21:09]: Yes, yes. It will always be a two-way communication. Airport operator will always be looking at higher revenues or higher tariffs. Economic regulator in India, they are always focused towards passenger, which should be the ideal way of doing it. Always, there will be a two-way communication, and it is backed by various reports, audits, checks and balances. Hence, final tariff is pro passengers. That's very important.

00:21:42] How does the rapid induction of wide-body aircraft by domestic carriers shift the dynamics of long-haul international routes? Do you think Indian airports today, at least the major hubs, are adequately prepared with transit infrastructure to rival other major hubs such as airports in the Middle East?

SD [00:22:06]: That's a very interesting question. I think Indian airlines, they do lack this at this moment. We do not have a large fleet of (inaudible 22.18), for example, we are talking of A350s or 787s or maybe we are talking of maybe IndiGo wide-body of 350 or 900s. That's something which is, at this moment, a question mark. One, we have not been connecting to the right routes. For example, when I say this, we have lesser number of flights, maybe we are talking from Air India or IndiGo directly to a place like Heathrow, for example, which can be an immediate opener for you for the entire European market or a wide-body aircraft to Singapore or I would say, furthermore to Japan or likewise to Dubai and so on and so forth. A crux is that we still have believed that we do not have the right passenger mix in India. The whole hesitation here is that maybe we do not have the demand here. That is where we have faced an internal challenge so far. I do not see that this is a deterrent because most of the airlines have understood that this is where they have to bridge it. Hence, the existing orders, which I am aware of, both of Air India, IndiGo, they are quite now focused towards bringing the wide-bodies. As long as wide-bodies do not come, it will remain a demand-supply gap and more of like a passenger experience gap.

That's very important to understand because once you settle that that means you are ready for long hauls. You are ready to take international markets and fly further. That's where you see it in that perspective. Today, most of the Middle East routes, which were earlier being catered by wide-body by international airlines are now shifted by narrow-bodies, which is not a great passenger experience. If you see Middle East, Dubai, entire Southeast Asia, a lot of the international routes are now replaced by narrow-body aircraft, which were earlier with the wide-body. It's not a great passenger experience, (1). (2) The connectivity is suffering because a lot of passengers are not just focused on tourism. There are further movements to Australia. For example, Southeast Asia, they're looking at South Australia [sic], maybe New Zealand or furthermore to other places on the Southeast Asia. I think this has become a deterrent, and I see this has to be bridged. I'm sure that the order books are looking optimistic where you can actually see it. Back end on the wide-body, of course, there are furthermore to be done at the runway. They are joining MRO facilities, immigrations, and other things, which also needs to be equally done. I think the large airports are already mapped to it. There's no issue. Only I think the capacity at the resources needs to be built.

SP [00:25:34]: The infrastructure-wise, when I look at the airports, at least the metro airports, those might be prepared.

SD [00:25:42]: Yes, this is already there.

00:25:48] How would you assess the current airport expansion pipeline, including the INR 1 lakh crore sector-wide CAPEX that is being undertaken over the next 4-5 years? What CAPEX utilisation, IRR or return assumptions are operators underwriting today for major brownfield and greenfield projects?

SD [00:26:08]: It's an interesting question. In fact, as far as the expansions are concerned, a lot of the airports have already been undergoing on this. I have been a privy to all the Adani airports and all the Adani airports are either in the capital cities or major metros. There has been a tremendous amount of infrastructure money, which has been pushed for each of the airports on modernisation, expansion, new terminals, etc. One very reason is that the moment you have gone from Airport [Airports] Authority of India to a private operator, the challenge is the requirements have overnight gone up, the expectation in the customers' mind has also gone up. When I see the brownfield, if you ask me about the brownfield, all the major metros have gone for massive expansions. Navi Mumbai, Jewar, now maybe the Bhogapuram Airport. These are all the greenfield projects, new Chennai Airport and so on and so forth. There are multiple airports, which are now the greenfield projects, which have also come in.

The whole addition of this capacity is looking at how do we expand and so as to take care of the upcoming demand, which is going to be in the next 5-10 years. What you asked me about the financial, of course, there are underwritings at various stages. I see the thresholds can be on brownfield up to as high as 60% and upwards. Maybe greenfields, we can talk of lesser, maybe around 25-30%. That's where I see where the EBITDA that any airport would look at would be upwards of 30-35% is the basic EBITDA that is being looked at. If you ask me about what is the likely threshold. Likely thresholds for maybe capacity of, say, 8-10 million would be about 30-35% is likely the EBITDA thresholds.

00:28:39] What is the payback period that operators today are underwriting for investments being undertaken, supposedly for brownfield expansions, which probably have a high utilisation rate as it commissions and begins commercial operations and would probably see a faster payback period compared to a greenfield expansion?

SD [00:29:07]: I will not say a period here for these airports because one, I think none of them have gone through the entire cycle of operations. Primarily, a brownfield would have a payback period of about at least a 10-year cycle. A greenfield will take at least 15-18 years. This is how I see the greenfield to give you a payback. Primarily, but these dynamics are purely based on the type of investments, the way various phases are designed. It so happens that airport does not construct a greenfield will not have all the phases in one year or one control period year. There can be various phases once you start seeing that, "Okay, phase 1 has started giving ROI," you will see the phase 2 has already started construction and the capacity is being built. I will not put a definite period of return because this is such a vicious circle of investments and ROI. It is really very difficult.

As a result, I think this thing was widely understood by Airport Authority while designing the concession model. Earlier, we expect about 30 years, (audio distorts 30.31) close to 50 years. At the end of the day, somewhere, it has to be a pure 10-year period of real earning. Airport operator cannot keep on investing and investing and there is no return somewhere. It has to be somewhere 5-10 years, a clear return period. Honestly saying that the investments which are looking at airport at various phases of developments are always… You'll see that every 5-10 years, there are major investments. Hence, the ROI calculations are going to be an uphill task, although I've given you some numbers, but I will be conservative on these numbers.

00:31:19] GMR Airports has announced plans for a USD 2bn expansion at Delhi and Hyderabad, and other operators are also planning significant CAPEX. Do you see any risk of construction-cost inflation, execution delays or sector-wide margin ROI compression in the medium term?

SD [00:31:42]: I will say GMR has been an old player vs Adani. GMR, of course, they had international airports already in their portfolio. What they do is they have been doing Delhi for a large time. Delhi being their largest investment hub followed by, at this moment, Hyderabad, followed by Goa, Nagpur, Bhogapuram. Over and above that, they are also investing in the Cargo City, Aerocity, etc, etc. I do not see that there is a great risk. One is, of course, the passenger traffic, which is pegged at this moment by ICRA is slightly subdued, maybe not a very honest feedback, but I see if that remains dull over a period of next 2-3 years, then it will be a risk. I think it is clearly going to come up. I would say, traffic is directly related. Hyderabad is actually expanding, which is now I'm seeing upwards of 35 million passengers. Hyderabad investments are going to be a great recovery of ROI because Hyderabad is going to be the entire eastern region hub I see in a large way after Kolkata connecting both the international and domestic routes for the entire eastern countries, both when I see eastern… I'm saying maybe upwards of China and so on and so forth, Hong Kong, so that way, you don't travel west when you are travelling to the eastern countries. I see Hyderabad is a great hub for that. Delhi investments is more fed towards development on the corridor.

In fact, that entire catchment area and after Jewar has invested heavily, so there is an internal conflict will always be there. Good to have that conflict because there will be a share of passenger, which will always go to Jewar. Since these are different operator, it makes a lot of importance that what all you have added to your capacity, how are you taking care of transit, your premium passengers, cargo, retail, aerocity development, etc. Those are the things where maybe GMR is investing heavily to see that it is not just the airport growth, but entire ecosystem of the airport growth. That makes a lot of sense that we are investing, but we are not just investing on building new bricks-and-mortar structure for the terminal building, but that ecosystem around the airport domain. Otherwise, if you see the Bhogapuram Airport, it is moving away from the Visakhapatnam Airport. That itself we expect upwards of 10 million on an immediate capacity. That's where Nagpur is growing a great cargo hub.

Nagpur will definitely emerge as a very high cargo hub. Already a lot of MRO activities are up there. I think it is going to be a great investment in the long run. All of these airports have a lot of aerocity development, which is the real estate backbone of the entire thing. It will be both the aero as well as the non-aero revenue is going to go up for even the non-flyers. I think the risks of CAPEX is not going to be a huge risk going forward because all of the airports are looking at a larger ecosystem growth rather than the air passenger growth, I will say.

00:35:39] Given that new airports such as Navi Mumbai are coming up, Jewar Airport is ramping up, and the Bhogapuram Airport that GMR just acquired, are we seeing incremental traffic creation or cannibalisation of incumbent hubs such as Mumbai and Delhi? What utilisation threshold do you think new airports and terminals need to reach EBITDA breakeven going forwards?

SD [00:36:14]: I think it's a very big investment decisions, which has already at the back of all the airport operators. While designing an airport, the catchment areas are being looked at in a very different way. For example, does Navi Mumbai has the same traffic of Mumbai, I will say no. At this moment, it is no because, of course, Navi Mumbai has a different traffic base. Even the flying zones are different, the catchment areas are different and Mumbai has a different traffic altogether. Now does it cannibalise? Yes, there will be a thin overlap. Of course, there will be a thin overlap of cannibalisation. Going forward, looking at various ways and modelling of these airports to come up in the years. At this moment, it will look a little cluttered. Going forward, as both the airports are in full function, Mumbai as well as Navi Mumbai in full function, we will see that each Mumbai doing about 60-65 million passengers and eventually Navi Mumbai giving up to almost 35 million passengers. That is going to be the real game here because the air traffic is designed like that. Hence, it would not be a great cannibalisation here. You asked me the next question, what is the threshold? There's no such clear threshold, both the operators, for example, Navi Mumbai, Mumbai both are taken care by Adani. At Jewar and Delhi, of course, you have different operators.

As I said, a 10 million capacity airport would look at an EBITDA of about 30-35% as the EBITDA. Still, I would say, even if you are doing upwards of 25-30%, I think it's a fair job done. Looking at various ecosystem, I think focusing on non-aero growth, aerocity growth. These levers do not dwindle easily with the traffic because there is another ecosystem, which is parallelly built, which is around the airport, which are not direct passenger-related. Of course, you have the non-passengers who are actually contributing to your business model. That's where I see that the de-risking of that will happen. Eventually, even if you are doing about 25-28%, it's a great job done.

00:38:48] Given the scale of upcoming borrowing that we are witnessing in the industry to finance the current expansion and the current pre-utilisation phase when new terminals generate limited cash flow, what is your outlook for airport sector financing costs and debt-servicing capacity?

SD [00:39:12]: I think this is where the entire scenario changes because what I have witnessed is about 10 years back, there were hardly any financing company globally who were actually very interested with the Indian price. Now the scenario is grossly changed. There are a lot of investors and since a lot of the investments have seen profitability now. You will see all the international players, one, of course, in the next bidding stage. Number two, you will see a lot of private players are emerging within India who are trying to bid into the new airports. (1) I see the atmosphere of investments in airport ecosystem has grown tremendously. That's a clear signal of a positive financing space. (2) I think since a lot of the sectors in the aviation have also called for FDIs, which are 100% allowed, for example, MRO, 100% FDIs are allowed. That means international players are looking safe place to invest. A lot of the reports, a lot of the backup study report shows that Indian skies are now the third largest aviation hub. It talks about one thing very clear that we are looking at a very safe investment place. This is the place which is already doing. Tomorrow, if investments are taken care well and it can be done with the ecosystem of the operator well, it is not an area to fail. That's what I see, whether it is GMR or Adani at this moment.

Now if you ask me on the financial numbers, yes, I would say, of course, if you see on a passenger growth, if I have to see upwards of 6-7% or 8%, any interest borrowing would be about 8-8.5% and our financing DSCR would be about 1, 1.2, 1.4 of that as on the downside. I will say, looking at GMR as an example, balance sheet is quite considerably more resilient than it was a few years ago because both Hyderabad and Delhi has started contributing tremendously. The growth of the interest cover is roughly about 1.7-1.8 in Q1 of FY27. That talks about still capital intensive. The INR 19,000 crore, what you have spoken, is faced between the traffic and the traffic recovery cost. Investment becomes then attractively only from the EBITDAs of the CFADS go faster. That's where I see that these airports, they will be able to service the debt and they will be able to take care of it because there has been an exponential growth on both aero revenues as well as the non-aero revenues from Hyderabad, Delhi, or other places. Hence, the expansion is taken care well with the financing that has been looked at from both the domestic and the international players.

00:42:54] Can you highlight how regulatory tariffs today are affecting revenue projections and debt serviceability of airport operators? For example, AERA's [Airports Economic Regulatory Authority of India's] August 2026 order for Hyderabad's fourth control period fixed the ARR [aggregate revenue requirement] at a lower rate than anticipated. How does this affect the ROE and debt-serviceability assumptions that operators underwrite?

SD [00:43:33]: That's an interesting question. In fact, all the airports are going through this in a very clear way. Today, our debt is… AERA is also aware of it. When we are talking of ARR, it is absolutely the combination of various elements. You have a RAB, you have a depreciation, you have the operational maintenance, you have the tax and the non-aeronautical revenue, which is 30% minus. With all this put together, that was initially the thought. Now what I see is GMR or other Adani, they are able to take care of it in a large way because, one, the traffic has… So far, I will not say the current projection, but so far, we have been able to service the debt because one, the traffic has grown significantly high. One important benchmarking, which I can focus today on the discussion is when I was starting about the discussion, Indian airports used to contribute about 23-24% or maximum 25% of the non-aero revenue. Largely, it was dependent on the aero revenue. Aero revenue constitute earlier about 75% of the total pie which was slightly a dependent element with the traffic, (1). (2) Certain bounces that we have seen from things like COVID or other exigencies, this has rattled the economic balance sheets. Hence, airports have also now seen that it can no more be dependent directly on the aero passengers only.

Since it's a regulated environment where aero is largely regulated, where AERA plays a large play here, so let's focus on something as non-aero and it can be non-aero structuring across the airport. It can be direct non-aero, it can be aerocity, non-aero. There can be multiple other developments inside the airport. Now that what it talks about is that we are not going to get affected by the cyclical growth. Even if there is a dip in the passenger, we'll still be able to take care of the non-aero. In the concession agreement, you will see that there is a minus 30% into the non-aero revenue. That's how the tariffs are set. Now these tariffs are maybe in the new concession agreements, we may have something different to see. It is a subject of discussion.

At this moment, ARR is basically a regulated requirement, not a guaranteed cash receipt because a lot of the developments under the AERA, under the hybrid model has been looked into details that whether it really takes care of the various investments that are desired in the airport and multiple of these investments are desired from a regulator perspective, where airport is mandatory to implement those. Such things, how do airport take care of those revenues in the future, how does airport is able to gear up on the revenues so that these type of expenses are taken care. I think it will be an uphill task. Currently, servicing the debt is not an issue. Going forward, the investments that are being looked at each of the airport and the expansion, it will be a slightly crunching if the passenger dependence is only the factor of growth. It has to be both the aero and non-aero growth, and that's where I see coming forward.

00:47:36] Can you highlight the key drivers of aeronautical and non-aeronautical revenue today? How do you see the balance between aeronautical and non-aeronautical revenue evolving as airports mature? What sustainable revenue per passenger do you expect operators to achieve?

SD [00:47:55]: I would say that today, it's a benchmark of how Singapore is evolving or how Dubai or Doha International Airport has shaped up. This is a clear indication that they have largely not been dependent on the aero revenue only, although they had the largest pie of international connectivity from the transits. What was they doing differently? Of course, you have landing, parking, your aircraft service fees, you have UDF, you have CUTE, you have CUSS fees, PBB or aero bridge charges, then your cargo, aeronautical charges, etc. These all constitutes the aero revenue. Largely, this was what I said in the last discussion is this has been grossly almost 75% contributing to the Indians any airport revenue or the balance sheet. Now non-aero is an important part, which was not a focused element. Over the period of time, it has become a very focused, particularly with Adani airports where retail, duty-free, F&B, lounges, car parking, ground transport, ATMs, your hangers, you take care of the various utility charges and various other facilities that you provide, your entire aerocity is a non-aero development. All this is grossly a great eye opener. Revenue per pax has been to the tune of USD 18 or USD 20 globally.

Indian passengers, we were trying to be at about USD 4 or USD 5 earlier, which is now maybe about USD 8 or USD 9 per pax, that's the spend per pax, SPP, what we call. That is something which is moving upwards, which is a great positive sign for most of the airport operators. If this touches the global benchmark of USD 18 or USD 20, I am sure that each of the airport operator or airport balance sheet would look like a 50% or maybe a 55% contribution by the non-aero and aero would contribute maybe 45% to the entire thing. That's a great jump. I see this thing moving very fast. The SPP modelling is moving very fast, and that is a very, very positive sign why a lot of the airport operators are actually investing in the non-aero various functions and departments because one, it is not regulated. Secondly, there is a huge non-flyer passenger, which you are able to encash even if they are not flying, for example, a bar on the curbside of a particular airport. That remains 24/7 open, and that is where still you earn a revenue from the non-passengers can be a city dweller who is coming and just spending some time.

00:51:38] What specific retail F&B and experience levers, such as direct duty-free insourcing or lounges, are being prioritised today to push SPP [spend per passenger] higher? Can you outline the trends and strategy being implemented on the ground today? With respect to lounges, we are seeing a shift where rewards are being pulled back and lounges are being very overcrowded. How are multiple levers being pulled across these segments to drive non-aero revenue higher?

SD [00:52:16]: Yes, of course, there are different type of lounges. One, of course, is an airline dedicated lounges, which can be for your first class and business passengers. There are the lounges which we are seeing, which is absolutely the royalty lounges, which we are talking of is which are connected to your cards or your debit or credit cards, etc. There are these type of lounges or there are other lounges which are focused towards dedicated like Adani lounges, you have seen it in Mumbai. They have both direct passengers can come in. They have various royalty points to their apps. For example, Adani One lounge can always have a direct access to their royalty points, etc. One, I see the spaces are getting crowded. Hence, how do you delimit certain passengers, the criteria thresholds are changing, one, because they do not have further capacity to increase. Lounge have very limited space of expansion. Within the limited space, how much you can do further, one. There are new players which are coming in TFS or Encalm, already there in, but there are other international players who are coming in place, which are adding to the lounge experience. There are different category within the lounge itself where you will see different type of passengers' eligibility are being looked the way maybe Dubai or Doha or Singapore has.

There are different classes or categories of these upgrades and other things which are, for example, fine dining or maybe curated menus or drinks or you can have spa facilities separately, etc. This is the lounge part. Look at that, non-aero is not just lounge, non-aero can be multiple retail ventures. When I was taking care on the other side, we have contracted with more than 500 international players, both on retail, F&B, duty-free, etc, to bring them to Indian airports. A lot of them have already started operation, for example, Wagamama, Lollo Rosso, and so on and so forth. There are multiple such players. What I see is that they are looking at this space. They want a space where they can operate well, they can create their brand and they can create that experience with the customers. That we have broken traditional thinking, for example, Ahmedabad only selling, for example, chai and samosa, those these are gone now. We are talking of maybe pastas and noodles, etc, being served. Those passengers are liking it. They come to the airport for experiencing that. They're not coming to the airport to have chai and samosas, of course.

Of course, there will be a clientele who are looking at chai or samosa, but we have come up from that thinking. Retail is also spaced at maybe bringing the best of Swarovski brand in your airports or maybe the best of jewellery, best of fashions, best of child wear, pet shops, and more of experience centres that can be spas, that can be lounges, that can be PlayStations, there can be many other experience which can cater to both the older generation as well as the younger generation. That's a very catchy area where a lot of the airports are thinking in depth at what can be the best way we entice the passengers and create a lot of facilities for them.

00:56:11] Beyond passenger retail, what contribution and growth trajectory do you expect for non-passenger revenue drivers such as air cargo terminals, cold chain logistics, MRO [maintenance, repair and overhaul] facilities or DOOH [digital out-of-home] advertising, which is also picking up pace today?

SD [00:56:27]: That's what I was saying that airport is no more just the passenger directly. Overall, the moment you create an airport, for example, you said about the advertising as a space, a great place. A lot of the OOH has invested heavily on the airports now for a greater time period for revenue or ROIs. That's one revenue head. There's a lot of rentals, car rentals and a lot of, I'm saying related to transportation that can be e-hubs, a lot of the direct access to even limousines at the airports. A lot of these facilities are being added for transportation as a part of it.

Then of course, you have the aerocity connecting. So aerocity has multiple avenues. We can just have with the same boarding pass, you can enter the best of five-stars and have your convention-centre meetings, etc, and go back. These are the revenue drivers, which is going to be around these airports and multiples, whatever you can think of should be just another outside the airport. That's the way smaller airport, like I will say, Lucknow for providing the best of your, say, biryanis or the cuisines or maybe the merchandise or maybe your Lucknowi Chikan, for example, the clothes that you wear. Those are now available right at the curbside of the airport. This is where you start getting the experience of making the customers go through it without actually travelling to the city. That's one way that most of the airports are working towards, and that is a great entire asset for them.

SP [00:58:20]: Like you rightly said, when it comes to bringing the culture, probably the experiences at the airport itself, and those are actually becoming major non-revenue drivers. I think that is something that I've also observed when I'm coming to airports and especially Adani Airport as well. I think there are a lot of F&B and retail options that are already opened despite the passenger volume being so low. I think those are already being set up in order to…

SD [00:58:48]: Yes. Important part for this discussion is that most of the airport operators work with a lot of cohorts and these cohorts are maybe the age that we are having to see in the airports coming up. 18-35 years, for example, is constituting about 40% of the entire passenger. You need to create facilities, whether it is retail, F&B, lounges, duty-free, etc, for these passengers who are looking at how do you engage and the growth is actually from these levers.

SP [00:58:48]: I think that makes it a lot clearer with respect to the observations that I've also had at the airports. Certain coffee places that are in demand with the 20-30s age are opening at airports today because those cater directly to specific cohorts.

00:59:23] What timeline do you anticipate for commercial operations to commence at the CSD [city-side development] parcels in Hyderabad, Mumbai, etc? What projections are currently being modelled for the adjacent hospitality and retail assets?

SD [01:00:02]: It is going to be an emerging business model. I would say it was a grey area. In the last 3-4 years, it has picked up well. The areas around the airports are being looked at whether it will be a build-and-operate model or it will be a lease model and various such models which can have the highest revenue structure for the airport. I think at this moment, the airports have to have facilities, which is around the aviation. That's the primary objective by AERA. AERA says that you can have convention centres, hotels, etc, etc. The whole point is do not make it so expensive that people don't experience it. That's something that I see like that that your processes or your facilities are created for passenger to experience it and contribute to the revenue by the investments that you are doing it. If you make it very high only with the five-star hotels, it may not be the only requirements at Hyderabad airports or maybe Mumbai airport. Of course, the chunk of the airports or the chunk of the investments will be on maybe the higher luxury engagement centres, maybe hotels or convention centre.

There is a simultaneous growth of smaller budgeted hotels also as well as facilities can be multiple such avenue, can be just a simple convention centre, there are shopping arcades and there are multiple engagement for young and emerging crowds. One important thing you asked me in the last question, various cargo connecting and the cargo connecting hubs, which are also being created. That is where I see it is going to add to the overall revenue. Although they are late, I see in the next 4-5 years, the aerocity structures around Hyderabad, Mumbai, Navi Mumbai is going to really emerge very, very strongly and that is going to be a real contributor to the revenue.

SP [01:02:24]: Is the delay on the part of operators still in the planning phase, or is the regulatory part involved as well?

SD [01:02:32]: No, the lands maybe in Mumbai, they are not free. The one thing which I noticed is a lot of the lands around Mumbai airports are not free. There are a lot of obstruction or other encroachments. Those are slowly getting removed over a period of time. Number two is outside area, you have to have definite understanding about what you want to create, how it is going to be travel-friendly for the commuter, how it is related to aviation. These are something which the regulator is also going to ask. Hence, your creation has to be from that perspective. I think most of the operators are focusing on the operations now. Real estate development has largely taken a little backseat. After COVID, I think there has been a push on this, where you see that large part of the revenue, which was dependent on the aero has got shifted to an understanding that we need to bring in the non-aero structures in place because such cyclicity of fall may adverse effectively the overall revenue structure. Hence, if it is not done well, then it will be a difficult proposition.

01:04:00] How are the roll-outs of biometric onboarding and automated baggage handling initiatives translating into actual reductions in terminal operating expenses per passenger for FY27?

SD [01:04:20]: That is very, very important because I think more on the actual spend, I would say that the passengers have gone through a very good experience ever since, for example, the Digi Yatra has got rolled out in most of the Indian airports. Any operator has invested heavily into these digitisation. Primarily, one reason is there was a chaos, the processing time was very high. We need to create systems and processes in Indian airports. That is something which is looked at a very, very clear angle, whether it is any of the airport operator. The investments are to the tune that if I have to invest INR 100, I see 40% is on IT and other digital infrastructure, which is being looked at, at the areas of investment because until unless I invest in these structures or these systems, it is not going to give me the experience, which I'm expecting from my passengers. Number two is all of them have been now mandated to have the self-baggage drops. Most of the large metros have already installed the capacities of the SBDs. These structures are already there. There is no change in the user development fee or the passenger fee at all. It is with the same fees and structure that passenger can avail this facility. This is now easing the traffic flow, I will say.

New gates are created, new resources are being built. Automatic tray systems are being added. Added to this thing, maybe you will soon see CTS machines, which are enabled the way any other international airport is, so that passengers do not have to take out all the baggage, (inaudible 01.06.16) of the bags and they can safely move in with a laptop. A lot of these structures are being built with the Indian airports to facilitate the passenger flow without much cost addition to the passenger development or user development fee or the passenger service fees. This is an important part right from the DGCA or the MoCA guideline that these facilities are must to be, as far as the user experience is concerned, most of the airports have now come with great apps and all of them have multiple apps where you can have guided passenger journey, gates to move, where to move, where is your current location, which is your gate, how much is the time taken for your travel or walking for the next gate. These are now automated, quite high. As much as you see going forward, a lot of the processes are getting digitised, which is going to reduce the passenger anxiety and give the passenger a great travel experience. That's the whole idea behind.

SP [01:07:23]: There would be a recurring CAPEX requirement for cybersecurity and IT infrastructure also upgrades for terminal today. To what extent is AERA allowing these digital investments to be capitalised into the RAB or…

SD [01:07:37]: RAB, when it is being calculated, IT is a part of the investment. Already no such embargo at this moment. Whatever is required from cybersecurity perspective or other digital initiatives, IT initiatives, this is part of the investment which the airport is doing. Hence, at this moment, AERA do not have major objections until unless it is not required. If it is a required thing, 100% is allowed.

SP [01:08:08]: Then I think we will conclude the Interview, but I believe that there's a lot to discuss when it comes to Indian airports. I'll conclude the Interview right now.

SD [01:08:29]: Thank you so much. It was great talking to you. I hope we have some take-backs by our audience who listens to this discussion.

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