AAI profit leans on privatized airports as core network bleeds

NEW DELHI: Airports Authority of India (AAI)’s profitability is being driven by an increasing number of privatized airports as most of the airports it operates remain loss-making, raising questions about the sustainability of its earnings as more assets are planned to be privatised.

Revenues from six airports operated under public-private partnership (PPP) agreements accounted for more than 30% of AAI’s net profit in the year ending March 2025, according to its annual report published in February.

At the same time, much of its own network is under pressure. An estimated 91 of the 122 airports owned by AAI, or about 75%, reported losses. ₹1,600 crore while the remaining 31 airports made a profit of 1,600 crore ₹2,740 crore.

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AAI reported total revenue: ₹20,648 crore and net profit ₹7,233 crore for FY25. Almost twice as much income ₹10,836 crore reported by GMR Airports Ltd and ₹10,224 crore by Adani Airports Ltd for the period.

However, a significant portion of AAI’s earnings came not from its own airport operations but from payments associated with assets it had already leased.

PPP increase

AAI received ₹2,232 crore from six PPP airports (Ahmedabad, Jaipur, Lucknow, Mangaluru, Guwahati and Thiruvananthapuram), all operated by Adani Airports. These payments are classified as “underrecovery” or compensation paid by private operators for investments made by AAI before the airports were leased. A portion of this amount includes a one-time payment and is not expected to recur.

Undercollection revenue increased nearly 150% from the previous year, contributing to more than 10% of AAI’s total revenue and more than 30% of its net profit.

In contrast, old privatized airports such as Indira Gandhi International Airport and Chhatrapati Shivaji Maharaj International Airport saw only around 5% increase in annual fees paid to AAI.

AAI owns and operates 122 airports and also generates revenue from airports leased to private operators under PPP arrangements.

“AAI is effectively moving towards a landlord model as most of the airports it operates are in loss. But the leasehold rent and PPP model are increasing both its revenue and profitability,” said Dipak Purwar, partner at Noida-based chartered accountancy firm SDSA & Co.

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The landlord model is a model where AAI earns lease rentals and revenue share from private airport operators rather than operating the airports itself.

” ₹2,232 crore it received as meager collections, including one-time payment, from 6 of the PPP airports, contributing more than 10% of the revenue and 30% of the profit. The policy specifies a regulatory asset base, a financial model used to calculate the value of infrastructure investments such as an airport terminal, and that payments towards recovery up to the date of commercial operation will be recognized as revenue over the lease term,” Purwar said.

Questions sent to AAI and the civil aviation ministry remained unanswered till the time of publication.

Within AAI’s own network, profitability is concentrated in a handful of airports. Kolkata Airport and Chennai Airport were the major contributors and approx. ₹855 crore and ₹500 crore respectively. Other profitable airports included Pune Airport, Patna Airport, Srinagar Airport and Bagdogra Airport.

While several other airports, including Kushinagar Airport, Rajkot Airport and Vijayawada Airport, continue to incur losses, non-operational airports such as Shimla Airport and Vellore Airport have also increased their maintenance costs.

Apart from PPP-linked revenue, AAI’s traditional revenue streams also showed healthy growth. Air navigation services revenue increased by 17% ₹4,700 crore, airport service revenue increased by almost 30% ₹5,482 crore and non-aviation revenue increased by 16% ₹1,911 crore due to impact of higher user development fees and commercial activities.

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Even so, analysts say the increased reliance on PPP-related revenues underscores structural stress in AAI’s core operations.

“The majority of AAI’s operational network continues to show structural stress. As more airports are privatized, the authority will increasingly rely on such revenue streams to support capital expenditures,” said Mark D. Martin, managing director of Martin Consulting.

This addiction may deepen further. AAI is set to privatize 11 airports, including profitable ones like Amritsar, Varanasi, Bhubaneswar and Raipur, and seven more loss-making airports, including Tiruchirappalli, Kangra and Gaya.