Small private airports' capex to grow 50-60% annually over next 3 years

Capital expenditure (capex) of small private airports is expected to rise 50-60 per cent annually over the next three years, driven by capacity expansion on account of a substantial increase in terminal utilisation levels, ratings agency Crisil said on Monday.

On the other hand, capital expenditure (capex) at large private airports will see a decline during the same period, as much of the capacity expansion has been completed or nearing completion, it added.

However, the overall capex of private airports will slightly slow down by 10-15 per cent to around Rs 40,000 crore over the next three years, as per the ratings agency.

Crisil said its analysis is based on the capex of 11 operating private airports and two soon-to-be-operational private airports, which together account for more than 95 per cent of India's private airport passenger traffic.

For this study, small private airports are classified as those with capacity of less than 20 million passengers per annum and located in Ahmedabad, Guwahati, Jaipur, Trivandrum, Mangalore, Lucknow and Goa, while the large private airports are classified as those with more than 20 million passengers or located in Delhi-NCR, Mumbai MMR (Mumbai Metropolitan Region), Bangalore and Hyderabad.

Capex at small private airports will be up 50-60 per cent on average in fiscals 2026-2028 compared to the previous three fiscal years. This will be driven by capacity expansion due to a substantial increase in terminal utilisation levels, Crisil said.

On the other hand, capex at large private airports will see a decline during the same period, as much of the capacity expansion has been completed or is nearing completion.

"Small private airports are expected to embark on a significant expansion of up to 1.5 times their current base by fiscal 2028. This is in response to escalating travel demand and moderate capacity on the ground," said Ankit Haku, Director at Crisil Ratings.

Strong demand leading to recovery of air traffic movement has yielded a remarkable compound annual growth rate of around 45 per cent in passenger traffic at small private airports between fiscals 2022 and 2025.

However, capacity growth at these airports has been relatively sluggish, with a modest CAGR of around 20 per cent over this period, resulting in terminal utilisation levels increasing from around 60-90 per cent and a need to build additional capacity, Haku added.

In contrast, large private airports are expected to see a significant reduction in capacity addition, following substantial expansion over the past three years, which has absorbed high traffic growth and kept terminal utilisation stable at 80-85 per cent, Crisil said.

Additionally, greenfield airports are set to become operational this fiscal year, with minimal capital expenditure required going forward. Their strategic locations in or near tier-1 cities minimise off-take risk, enabling a smooth ramp-up of passenger and cargo volumes.

As a result, in the medium term, most capital expenditure will be allocated towards maintenance refurbishing equipment, upgrading amenities and developing infrastructure rather than expanding capacity, the ratings agency said.

"While capex intensity for small private airports will rise to over 2 times, project risk will be manageable since these are expansions of existing sole airports in their respective cities. Further, their sponsors' expertise in operating large private airports and their strong fundraising capabilities also mitigate some of the risks," said Gauri Gupta, team leader at Crisil Ratings.

Capex intensity is the ratio of capex to earnings before interest, taxes, depreciation and amortisation.

As for large airports, a slowing of capex will provide an opportunity to further sweat out their capacities, with traffic growth rising to around 30 per cent CAGR over the last three fiscal years. Further, an established regulatory tariff framework that provides a pass-through of capex costs with reasonable returns remains conducive for the sector, Gupta added.