Aerotropolis comes to India
The concept of aerotropolis or airport city, though in a
nascent stage, is fast catching up in India, says Raj Shekhar Agrawal,
Director, Bengal Aerotropolis Projects Ltd, and Managing Director, Pragati 47.
The civil aviation sector in India is growing at a phenomenal
pace and has become a major contributor to the country's economy. This is
discernible from the fact that Indian airports handled 60 million passengers and
1.3 million tonnes of cargo in 2004-05 with a growth rate of 22 per cent and
21.6 per cent respectively. Furthermore, passenger traffic is projected to grow
at a CAGR of over 15 per cent in the next three years, expecting to cross 100
million by 2010. On the other hand, cargo traffic is expected to grow at over 20
per cent per year over the next three years crossing 3.3 million tonnes by 2010.
During the last few years, there have been significant policy changes in the
sector such as the introduction of 'open sky policy' and the entry of low-cost
airlines, which has brought air travel within the reach of the middle class travellers and given a whole new meaning to the aviation sector. Having said
that, it is clearly evident, in the last decade, air traffic has grown beyond
In India, for a long time, metros like Delhi, Mumbai, Bangalore, Kolkata etc.,
have flourished and emerged as the nerve centres for all major economic and
commercial activities. Poor air connectivity at tier-I and tier-II cities has
made these areas inaccessible and resultantly reduced the interest levels
amongst prospective investors. Such a situation has lead to an unbalanced growth
of the economy.
However, in the current scenario, with the urban population in the metros
exceeding beyond permissible limits, it is the tier I and II cities that need to
prepare for the future. The aviation industry, which was limited to the
metropolitan areas, has now spread its wings to the smaller cities, as there is
vast potential lying untapped in category II and category III cities. We have
about 300-million strong middle-class population that forms the demand base for
Though the government has taken several initiatives in alliance with the private
sector for capacity augmentation at airports such as modernization and
upgradation of existing airports and development of new greenfield airports,
there is a huge gap that exists in the implementation of projects. While
modernisation of airports in the metros has evinced interest amongst a host of
private companies, the non-metro airports and greenfield projects are lagging
behind owing to the commercial viability of these projects.
In such a scenario, what emerges as an interesting and viable model for
development of airports is the aerotropolis. The term 'aerotropolis' means
'Airport City' and has been popularised by American academician Dr. John Kasarda.
It is a city in which the layout, infrastructure and the economy are centered
around a major airport. In its simplest form, the aerotropolis is an economic
hub that extends from a large airport into an adjoining area that consists
mostly of distribution centres, office buildings, light manufacturing firms,
convention centres, and hotels, all linked to the airport via roads, expressways
(aerolinks), and rail lines (aerotrains). These aerotropolis are powerful
engines for promoting local economic development and are a good source for
procuring foreign investments.
Unlike conventional airports, an aerotropolis leads to a parallel growth of
other prominent sectors like real estate, hospitality, manufacturing industries
etc. This becomes possible as these sectors get a lot of exposure in terms of
investments, business opportunities etc. Over the years, aerotropoli have come
up in a big way in different corners of the world. The most developed examples
of aerotropoli are to be found in the rising economies of Asia and Middle East -
and typically in city-states such as Hong Kong, Singapore, and Dubai. They have
gained immense popularity for the fact that in addition to their traditional
services, major airports have developed significant non-aeronautical commercial
facilities, services and revenues.
The concept of aerotropolis or airport city, though at a nascent stage, is fast
catching up in India. This is because it serves as a viable investment option as
compared to stand alone airports. In an aerotropolis, a major share of revenue
comes from non-aeronautical components such as real estate, hospitality, tourism
which yield faster returns than the aeronautical components. In such a scenario,
even though the aeronautical part has a long gestation period, the financial
standing of the company is not affected due to returns from the
There are factors that are slowing down the development of aerotropoli. Factors
like getting clearances from the government and land acquisition could be
possible hindrances that can slowdown the process of setting up of aerotropoli.
However, the announ-cement of the new greenfield airport policy is expected to
make the process a bit faster.
Financing of airport infrastructure has some inherent problems. These projects
have a large element of sunk cost, a very long gestation period and highly
uncertain returns on investment based on several assumptions of traffic growth
that may fail to materialise. The current pattern of financing is predominantly
based on internal resources of Airports Authority of India. Funding through
external assistance, external commercial borrowings, loans and equity has been
negligible. The allocation of budgetary grants is limited to certain airports in
remote and inaccessible areas. Considering the astronomical sums which seem to
be required for modernisation and upgradation of existing airports and for the
new airports, there has to be a clear privatisation of projects so as to utilise
state resources in the most optimal manner. Further, the financing mechanisms
will have to be looked at from a thoroughly novel standpoint.
The Indian aviation industry is on the verge of metamorphosis and it is now
inevitable to stop it from growing and flourishing across all borders. There is
a great potential to be tapped in the industry as the projected growth in the
domestic passenger is about 6 per cent and so there is an urgent need of
aviation infrastructure in near future. Airports are such vital centres of
growth and development that they have become as important to a region as a
city's core business region.
After decades of haphazard development around old airports, new airports such as
the one at the Durgapur Aerotropolis are being built with the goal of creating
more than an airport. In the near future, tier-I and tier-II cities can benefit
a great deal from the setting up of aerotropoli, as these will bring in
passengers and will lead to a rise in cargo movements. All these will bring in
facilities required to support the aeronautical infrastructure that will further
create a demand for the housing and hospitality sectors. With the gradual shift
towards services and change in the nature of airport business towards
non-aeronautical revenues, the idea of developing aerotropolis could be one of
the best alternatives in the economy.
[May 19-25, 2008]