Globally, the retail business that occurs inside the precincts of an airport are usually managed by the Airport Operator. BAA, British Airports Authority, through its subsidiary operates several airport retail businesses in the UK. Similarly, at Changing Airport in Singapore, the Government agency also manages the travel retail business. Even at Dubai International Airport, the retail business is craftfully and carefully curated and run by the Government agencies. In a similar line of business thinking, Adani Group which has Eight Airports in India and a new one coming up at Navi Mumbai, has taken a strategic buy out of the incumbent Travel Retail operator Flemingo. The company sent a note to the National Stock Exchange which can be accessed here.
In the new arrangement, Adani Airport Holding Limited (AAHL) the flagship holding company that operates its Airports will acquire 74% Share Capital in Mumbai Travel Retail Pvt. Ltd. in which Flemingo Travel Retail Pvt. Ltd is a key stakeholder. Through this, the company is expected to up the ante by offering world class products and services through its Duty Free Business in the International Departures and Arrivals area and may also refurbish the domestic terminal retail areas with a fresh line of thinking and execution. Pre-Pandemic, Mumbai Airport, alongside Delhi’s IGI Airport would cater to around 30 million passengers each, annually amounting over 50% of all air traffic in India. Clearly followed Bangalore Airport which witnessed a whopping 32 min pax in 2019 due to new routes to Europe which were introduced at the time. The fourth largest airport in India by pax traffic was Chennai Airport with over 20 min pax in 2019 ahead of Kolkata & Hyderabad.
With the Modi Governments vision to make air travel seamless and the entire experience of flying to be at par with global peers, over 20 airports have already been privatised or are undergoing privatisation including the ones at Thiruvananthapuram, Ahmedabad and Mangalore among others. According to the Finance Minister of India, Smt. Nirmala Sitharaman, the Govt. owned assets are only being leased and being given away or being sold, for want of revenues through PPP – Public Private Partnership instead of investments to the tune of billions of US dollars by the exchequer. That the private airports at Mumbai, Delhi, Hyderabad and Bangalore are winning international awards and accolades go to show the success of the Privatisation mantra which commenced in 2004 when the two brownfield airport terminals at Mumbai and Delhi were given to the GVK Group and GMR Group by the then Congress Govt. at the Centre led by Shri Manmohan Singh.
Non-aero revenues are an important source of income to Airport Operators, ranging from 20-40% of the total earnings, for various airports worldwide. For the record, Singapore’s Changing Airport, Hong Kong Airport and Dubai Airport had annual revenues of over USD 1 – 1.2 billion pa. Needless to say, the share of revenues to the Airport operator in these cases was significantly higher than elsewhere in the world. In India, all Airports put together did not have revenues to the tune of USD 1 Bn pa, per-Pandemic though India is the third largest domestic air travel market in the world after the US and China. With eyes set right on commercial revenues, it would be interesting to see how Adani Airports fare in this game which they have entered only a year ago.