Airports woo lifestyle brands to grow non-aero biz as air traffic rebounds

Major private airports witnessed 12% CAGR growth in non-aeronautical revenue between FY 2017-2021, as per Icra report

Major Indian airports are looking to capitalise on the rebound in air traffic to attract brands, improve customer engagement and enhance their non-aeronautical revenue.

While Bangalore International Airport Limited (BIAL) will double its commercial space with the opening of terminal 2 in mid-2022, the GMR group hopes to draw on the experience of its strategic partner Groupe ADP of France and attract more high street fashion brands at its airports.

“As passenger volumes continue to recover, spend per passenger too has witnessed a slow recovery,” said Hari Marar, managing director and CEO of BIAL. He declined to share figures but said that the recovery has been driven by positive performance by retail and F&B outlets, brand activation and consumer engagement initiatives to improve passenger experience.

Major private airports (Delhi, Mumbai, Hyderabad, Bengaluru and Kochi) witnessed 12 per cent CAGR growth in non-aeronautical revenue between FY 2017-2021, according to an Icra report. A decline in tariffs resulted in a change in aeronautical and non-aeronautical revenue mix at major private airports from 67:33 in FY 2017 to 49:51 in FY 2020.

Airports are now looking to consolidate the revenue from non-aeronautical streams which includes retail, duty free, advertising, real estate development, car parks among others. Mumbai and Delhi airports also include revenue from cargo and ground handling businesses in this segment.

Marar claimed that Bengaluru airport would be amongst few airports in the world which not only has 95 per cent of its retail and F&B outlets operational post-lockdown but has opened 30 new commercial outlets in the last one year.

Bengaluru’s existing terminal 1 has a hundred commercial outlets. Terminal 2 (T2) which is expected to open in mid-2022 will have more than hundred commercial outlets of Indian and international brands.  

“The onboarding process for commercial partners for Terminal 2 are in progress, and tenders for lounges and master F&B concessionaires are already completed,” Marar added.

The GMR group is targeting higher spend per passenger by attracting high street fashion stores at Delhi and other airports. This is being targeted in the next 12-15 months. “The idea is to offer brand and merchandise which is available at international airports like Dubai,” said a person familiar with the plan.

The GMR group declined to comment. The Adani group which operates seven airports including the one in Mumbai did not respond.

Mumbai International Airport Limited earned around Rs 800 crore from non- aeronautical sources in FY 2021 and its share in total operating income declined to 44 per cent compared to 53 per cent a year earlier. Delhi airport had around Rs 1,280 crore in non-aeronautical revenue in FY21 and this accounted for 52 per cent of its operating income.

“The non-aeronautical yield per passenger at major private airports in India is low compared to major private airports in the world. Given the evolving consumer spending behavior Indian airports still have a significant room for improvement. The aeronautical revenues are regulated in nature where returns are capped and to maximise the return on capital employed airport operators need to improve their non-aero yields,” said Rajeshwar Burla, vice president and group head (corporate ratings), Icra.

Non-aero yield per passenger comparison

Airport/Airport Operator	Non-aero yield per passenger (in $)
Private airports in India	3.7
Airports of Thailand	5.7
AENA (47 airports)	6.3
Groupe ADP (28 airports)	6.5
Copenhagen airport	9.9
Miami airport	10.2
London Heathrow airport	10.7
San Francisco airport	11.1
Sydney airport	12.3
Auckland airport	12.8
Hong Kong airport	15.7
Singapore airport	16.4