Overview of Airport Costs and Revenue
Friends, the air travel market in India is growing at the rate of 7% every year, that is why we are seeing new domestic and international airports opening across the country. It costs thousands of crores to build these airports. And not only the government but private companies also invest in it.
Costs Involved in Airport Construction
Yes, but then what happens to this investment? How do these airports recover their costs? Almost all the airports in India are profitable, which means money is coming from somewhere. But what are the sources of income of the airport? Let us try to know in today’s video, before we go to the earning of the airport, let us first see how much money an airport has to spend. This will give us an idea. It will happen that how much money does an airport have to earn to be profitable? The cost of the airport starts from the moment the plan to build it begins. The biggest expense in this is land acquisition, after which there is also the development of infrastructure.
Challenges and Costs Overruns
There remains a challenge, if we look at it in this way, the cost of the recently built Navi Mumbai International Airport was estimated at Rs 167000 crores, but by the time it was ready, the cost had reached approximately Rs 225000 crores. Apart from this, Jewar in UP is the capital of Asia. The largest airport, Noida International Airport, is being built and its cost has also been estimated at Rs 0000 crore for now.
Recovering Costs and Operational Expenses
Now an airport has to recover this cost in its lifetime so that it can think about profit. Now after this, the airport has to recover its cost. Other expenses include salaries of employees, maintenance of runways, marketing administration, security and management expenses along with bills like electricity and water supply. Apart from this, all airports also have to pay money to Airport Authority of India i.e. AAI. Yes. Because all these airports are dependent on AAI for air traffic control and navigation services like compots, if the expenses of the airports are seen along with their expenses then the figure will become more clear for us if we talk about IGI Airport of Delhi.
Aeronautical Revenue Sources
The year 2020 has been the biggest year in terms of revenue in the last four to 5 years, where the revenue of IGI Airport in 2023 was around Rs 3000 crore, while in 2020 this revenue was Rs 4.24 thousand crore. Out of this 4.24 thousand crore, the total profit of the airport is around Rs 13.1 crore. Which takes its total expenses to around Rs 4.23 crore. Every year Delhi Airport receives 3 to 4 crore passengers which shows that their per passenger cost is around Rs 2000. Now if the airport has to be profitable then they have to pay this Rs 2000000. Revenue is a large part of the cost of aeronautical revenue, so it is directly included in your flight tickets.
Landing Charges and Other Aeronautical Fees
Every airline has to pay landing charges for a plane. These landing charges are determined by the weight of a plane. If we talk about landing cost, then Once again let us take the example of IGI Airport, see it is clearly mentioned in their rules that any domestic flight whose weight is up to 100 metric tons will have to pay MT 99.2, after this the aircraft which are more than 100 MT will have to pay MT 99.2. Apart from Rs 9952, they will have to pay Rs 8369 separately on metric tonne weight. This cost increases even more for international flights. Apart from this, the airline also has to pay the amount of time an aircraft spends inside the airport between landing and take off. Parking fee also has to be paid. If an aircraft remains parked at an airport overnight, then some extra charges are also added to it. This parking fee also keeps changing according to the size of the aircraft and the location of the airport. After this, the next charge is This fee of Passenger Service Fee is charged on passenger basis at all airports. This fee includes airport security fee, terminal service fee and charges of other facilities provided to the passengers. Apart from all this, fuel surcharges and user development fee are included. Airports also earn their aeronautical revenue from things like:
Non-Aeronautical Revenue Streams
Now let’s look at it with an example, the weight of a Boeing 787 plane is about 115 metric tons, inside which there is a seating arrangement for 250 passengers, its landing cost is about Rs 1.32 lakh and the airline has to pay Rs. It will charge ₹ 2500000 for this plane. Apart from this, the airline will also have to pay ₹ per passenger to the airport. Now it does not matter how many seats out of 250 are occupied because the airline will have to pay for all the seats regardless. Whether there are any passengers on it or not, thus for 250 seats they have to pay around Rs 1.35 lakh more. After this, airports also charge passengers Rs 100-00 as user development fee. Apart from this, every airport charges Rs. There is also an aviation security fee, but for this the passengers pay about ₹ 2000000. If an airport is not able to fill the class seats, then many passengers are upgraded because the airline has to spend the same amount for all the passengers. All the expenses are paid by the airline companies to the airport and they include a major part of these charges in your flight tickets, but compared to the aeronautical revenue, the non-aeronautical revenue of any airport is higher, only Delhi’s ITI airport is Again, if we take it as an example, where their total revenue was Rs 3000 crore in 2023, out of this. They had earned 17000 crores from non-aeronautical revenue.
Non-Aeronautical Revenue Sources
Non-aeronautical revenue is earned from many types of sources. The first of these is parking charges to go to the airport and come home from there, whether you use a private vehicle or any other vehicle. Everyone has to pay parking charges for cab or shuttle service. There are specific pickup and drop off zones inside the airports where the buses and cabs deployed also pay charges for this. If we look at IGI Airport, it takes half an hour to park a four wheeler there. One has to pay ₹ 10 for parking and ₹ 10 for one hour. After this, ₹ 1 more is added for every extra hour. If someone wants to park his car there for 5 to 24 hours, then he has to pay Rs. For two wheelers, they have to pay up to ₹ 6600. On the other hand, for two wheelers, there is a charge of ₹ 10 for the first hour at the airport and after that, ₹ 10 is added for every extra hour. Apart from this, cab services are also charged here up to ₹ 1. In this way, 20 to 30 percent of the non-aeronautical revenue is earned only from parking charges. Along with this, when airports acquire more land than the land acquired, one of the objectives is that the future
The option of expanding the airport remains open, but at the same time, they also understand that with the construction of the airport, the price of this land will increase significantly in the real estate market. From time to time, the airport sells this land to big hotels and other Businesses keep earning money by selling them at higher prices.
Advertisement and Retail Revenue
Apart from this, even before reaching the airport, you see many billboards, digital screens and other types of promotional material. Generally, these are also controlled by the airport. Inside the airport too, you see similar things. Advertisements will be visible and also the people coming to the airport are mostly from high income category, which means that their purchasing power is also high, that is why the advertisement spaces around and inside the airport are sold more expensive than the normal market rate. If we look at other things inside the airport, you will also find many retail stores and restaurants in it. Either the airports charge very high rents from them or the airports also have a share of 15 to 25 percent in their sales, this is the reason. Brother, the cost of a normal water bottle or samosa in these places is quite high as compared to outside.
Strategic Passenger Management and Revenue Generation
Airports also ensure that people come here, that is why the passengers are asked to pay one and a half rupees before their flight. Or reach the airport two hours before. Although airports give the logic that this can counter the delay in check-in and other work, but today airports have so much technology and staff that they can do all this work in about 30 minutes. They can settle inside but they do not want to do so because if the passengers start coming to the airport just 30 minutes before their flight, then they will not have time to roam around in the airport and they will not be able to buy anything besides seating inside the airport. This is also deliberately kept to a minimum so that when people go to sit in these restaurants, they will definitely buy something and the airport will also get profit from it. Now the airport makes every effort to ensure that before a passenger boards his flight, They can spend more and more time at the airport so that their chances of earning also increase. Every type of shop inside the airport is placed very strategically so that the same kind of customers pass through it at the same time and to buy the goods. Be interested, like in restaurants, most of the places are placed in the main area from the baggage counter to the security, here people have to wait and there are not enough seats available for them, now in such times they are forced to sit in open restaurants. In this way, only through food and drinks, an airport earns 10 to 20 percent of its non-aeronautical revenue.
Duty Free Shops and Special Services
Now after this comes the duty free shops. These are the shops where you do not have to pay any tax on any item. This concept was first started in 1947 by an airport in Ireland for its international passengers. Seeing its success, today all the international airports of the world have adopted this method in duty free shops because the passengers do not have to pay any kind of tax. There is no need to pay any tax, hence most of the people like to shop from here. Compared to a normal shop, any item here is cheaper by 20 to 30 rupees, which contributes to increasing the customer demand. Duty Free Joss’s 75 At Rs 80, the revenue comes only from the shopping of cigarettes and alcohol, which are easy to carry and if you are going somewhere, you can also take alcohol as a gift, although unlimited shopping cannot be done from here. Some rules regarding free shops are also quite clear, such as according to the limits of the Central Board of Excise and Customs, in India, one passenger is allowed to carry only ₹ 2500000 from one duty free shop and only 2 liters of duty free alcohol.
Premium Services and Partnerships
Let us come to some other sources of income. See, there are launches inside the airport. This is a separate area where passengers get special treatment. Passengers also have to pay a lot for launch access, like the lounge at IGI Airport. For access, you get ₹ 1000000 which gives free launch access to its customers. In this type of arrangement, the credit card company pays an annual fee to the airport and the customers enjoy free launch access. This arrangement is also quite profitable for a credit card company. This is because the customers coming to the airport are from high income group and if they are using their credit cards then it is very profitable for the company. On the other hand, the company is now demanding higher annual charges for these credit cards also from its cost customers. Customers can also easily pay this money considering the access and other benefits that can be launched on credit cards, that is, if seen in a way, credit card companies use airport launches for their promotions so that they can sell their services and These are some of the means by which airports mainly earn their income. On one hand, from aeronautical revenue, the airline company pays them landing charges, parking fee, passenger utility fee and many other types of fees, while on the other hand, non-aeronautical charges are paid to them directly by the passengers. They provide revenue through parking fees and sales. Apart from this, airports also earn money from the cargo coming to the airport and its handling. This earning becomes even more significant for the airports of IGI and Mumbai because most of such cargo shipments are there in the world. They reach from all over the world or are sent all over the world. Today the number of airports in India has crossed 100 and we are seeing that there is competition among more and more private companies to handle their operations. You have seen that the number of earnings from airports can go into thousands of crores, that is why these companies sometimes do not shy away from bidding for these airports even by taking huge loans.
