Centre gives in-principle nod to lease -out 11 AAI airports in five bundles

The government has taken a significant step towards expanding private participation in the country's airports, with the Public Private Partnership Appraisal Committee (PPPAC) granting in-principle approval for leasing out 11 Airports Authority of India (AAI) airports under five bundled concessions. The decision, made at the committee's 149th meeting on August 4, paves the way for the third round of airport privatisation, with private operators expected to invest approximately ₹8,622 crore under 50-year concessions, according to documents reviewed by The Economic Times and The Hindu Business Line.

Five bundles, one concessionaire each

The five bundles, each to be awarded to a single concessionaire, pair larger 'anchor' airports with smaller ones: Amritsar-Kangra, Varanasi-Gaya-Kushinagar, Bhubaneswar-Hubballi, Raipur-Aurangabad and Tiruchirappalli-Tirupati. Amritsar, Varanasi, Bhubaneswar, Raipur and Tiruchirappalli serve as the anchor airports in their respective bundles, according to NewsX.

The proposed concessions will cover the operations, management and development of the airports, with a concession period of 50 years. AAI will act as the sponsoring and implementing agency for the proposed transactions, as per official documents reviewed by The Hindu Business Line.

The Bhubaneswar-Hubballi bundle has the highest estimated investment requirement at ₹2,725 crore, followed by Varanasi-Gaya-Kushinagar at ₹2,467 crore. Raipur-Aurangabad requires ₹1,496 crore, Tiruchirappalli-Tirupati ₹1,411 crore and Amritsar-Kangra ₹523 crore, as per documents reported by The Economic Times and The Hindu Business Line.

The projected returns for the bundles have also been outlined, with the Varanasi-Gaya-Kushinagar bundle offering the highest projected equity internal rate of return (EIRR) at 18.6 per cent. The Amritsar-Kangra bundle has a projected EIRR of 17.5 per cent, while Tiruchirappalli-Tirupati and Raipur-Aurangabad are projected at 16.7 per cent each, and Bhubaneswar-Hubballi at 16.4 per cent, according to The Hindu Business Line.

Addressing concentration concerns

The government is looking to address concerns over market concentration by capping the number of airport bundles that a single bidder can win, according to multiple reports. The move comes after the previous round of airport privatisation in 2019, when the Adani Group won all six airports on offer — Ahmedabad, Lucknow, Jaipur, Mangaluru, Guwahati and Thiruvananthapuram — with all six handed over by October 2021, as reported by The Hindu Business Line.

The issue was flagged by the PPPAC Chair, who, according to CNBC TV18, asked: "Given the oligopolistic nature of the aviation sector, what measures have been envisaged to ensure that the risks related to concentration and over-leveraging are minimised, considering these risks can have a cascading effect across all the projects?"

In response, the Ministry of Civil Aviation (MoCA) said the number of airport bundles that may be awarded to a single bidder would be capped, though the exact number has not yet been finalised. "The modalities of such capping are being finalised," the ministry said, according to reports.

This is not the first time concerns over concentration have been raised. In the previous round, the PPPAC had rejected key recommendations from the Finance Ministry and NITI Aayog, including a limit of two airports per bidder and a requirement for prior airport operations and management experience, according to The Hindu.

Next steps and market sounding

The proposal is now set to move towards securing the PPPAC's final approval, following which it will be placed before the Cabinet Committee on Economic Affairs (CCEA) for consideration, as per The Hindu.

Before that, MoCA will undertake a market-sounding exercise with potential infrastructure players to assess investor interest in the proposed transaction structure. Feedback from potential private-sector participants will be considered before the proposal is modified, if required, and submitted to PPPAC for its final recommendation, as per The Hindu Business Line.

The bundling of larger and smaller airports is aimed at improving the long-term sustainability of smaller facilities through cross-subsidisation from larger airports. The investment will cover sanctioned AAI capital expenditure and additional capacity expansion, with sanctioned capex to be completed within three years of commencing commercial operations. Further expansion will be linked to traffic and capacity thresholds under Airports Economic Regulatory Authority norms, as reported by The Economic Times.

The proposed concession structure also envisages making city-side land available to private concessionaires to enhance financial viability, according to The Hindu Business Line. The revenue streams are expected to include aeronautical, non-aeronautical and city-side development revenues.

Officials said AAI will continue to own the airports, with private concessionaires operating, managing and developing them for the concession period, after which the airports will return to AAI. Bidders are expected to quote a per-passenger fee linked to domestic passenger traffic, as per NewsX.

The plan had moved to the PPPAC in 2025 after earlier consultations on leasing more than 10 AAI airports under the PPP model, according to The Hindu Business Line.

Meanwhile, potential interest in the assets is already emerging. Adani Enterprises has reportedly indicated plans to bid aggressively, with GMR and Vinci named among potential bidders in earlier reports, NewsX reported.