Regulator snubs revenue projections at Adani-controlled Thiruvananthapuram Airport

Airports Economic Regulatory Authority says Thiruvananthapuram Kerala International Airport Ltd’s F&B and retail revenues are just 12% of the norm in other airports; contract awarded to Adani subsidiary with low revenue sharing structure

The Adani-controlled Thiruvananthapuram Airport’s projection of revenue from non-aeronautical services such as the sale of food and beverages — used to subsidise costs levied on airlines and passengers — is just a “miniscule” 12% of the norm, according to the country’s airport tariff regulator. In fact, it is only a third of what the airport earned before privatisation.

The Airports Economic Regulatory Authority (AERA) has recommended that this revenue projection should be hiked fourfold, from the ₹103 crore proposed by the airport to ₹395 crore, over a period of five years. The Adani-run airport has dismissed the AERA’s projection as “notional revenue”.

The AERA has also questioned the manner in which the master contract for non-aeronautical services was awarded to an Adani group subsidiary, with restrictive bid criteria and “a low revenue share of 10%”.

This structure led to the airport operator reducing the mandatory 30% of non-aero revenue — which must be funnelled back for cross subsidising the costs borne by airlines and passengers — to 30% of only the 10% of revenue shared, that is, a mere 3% of the total. This arrangement will impact airport users, the AERA has said. The global airlines body, the International Air Transport Association, has also said that this formula is “not justified”.

These observations were made in a consultation paper floated by the AERA on February 12 to determine the revised tariff for the five-year control period, from April 2022 to March 2027. It invited various stakeholders, such as airlines, airports, and ground handling agencies, to submit their comments by March 15, after which it will issue a tariff order.

The Thiruvananthapuram Kerala International Airport Ltd (TKIAL) is a wholly-owned subsidiary of Adani Enterprises Ltd, which signed a concession agreement with the Airports Authority of India in January 2021 after a privatisation process to operate, manage, and develop the airport for a period of 50 years. Adani Airport Holdings Limited (AAHL), incorporated in 2019 as a 100% subsidiary of Adani Enterprises Ltd, holds eight airports in its portfolio, including TKIAL.

The AERA noted that the non-aeronautical revenue (NAR) projected by TKIAL for the five-year period was “significantly lower” as compared to that of other public-private partnership airports such as those in Delhi, Mumbai, Bengaluru, Hyderabad, and Cochin, where it is at least 50% of the total operation and management (O&M) expenses.