Private operators expected to invest ₹8,622 cr in 11 AAI airports proposed for lease
The government has proposed leasing 11 Airports Authority of India (AAI) airports to private operators under the public-private partnership (PPP) model, grouped into five bundles
Official estimates project private investment of at least ₹8,622 crore across the 11 airports, with project internal rates of return (IRR) estimated at 10.7-12% and equity IRRs ranging from 16.7% to 18.6% depending on the bundle
Each bundle is proposed to be awarded to a single concessionaire for a 50-year concession period, with city-side real estate development expected to support the projects' financial viability
The proposal received in-principle approval from the Public-Private Partnership Appraisal Committee (PPPAC), chaired by the Economic Affairs Secretary
Legal Basis for Airport Leasing — Section 12A of the Airports Authority of India Act, 1994
Airports in India are statutorily under the Airports Authority of India (AAI), a body corporate constituted under the Airports Authority of India Act, 1994. Section 12A of the Act empowers AAI to lease out its airports (in whole or in part) to private entities "in the interest of better management," which is the specific legal provision underlying every round of Indian airport privatisation, including the current 11-airport proposal.
Key Details
- AAI constituted under the Airports Authority of India Act, 1994 (merging the International Airports Authority of India and the National Airports Authority)
- Section 12A permits leasing of AAI airports to private parties for improved management, subject to conditions the AAI may impose
- The PPP Appraisal Committee (PPPAC), chaired by the Secretary, Department of Economic Affairs, appraises and approves central PPP infrastructure projects, including airport concessions
The 11-airport, five-bundle PPP proposal was cleared in-principle by the PPPAC under this same Section 12A framework that has governed all prior AAI airport leases.
PPP Model in Indian Aviation — Concession History
India's airport PPP journey began with the 2006 privatisation of Delhi (IGI) and Mumbai (Chhatrapati Shivaji) airports on long-term concessions. This was followed by a second wave in 2019, when six AAI airports — Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati, and Thiruvananthapuram — were awarded on 50-year concessions via a "per-passenger fee" bidding model, all won by a single private conglomerate. The current 11-airport plan represents a third wave of AAI airport privatisation.
Key Details
- 2006: Delhi and Mumbai airports privatised via joint-venture concession structure
- 2019: Six AAI airports awarded 50-year concessions on a per-passenger-fee bidding model (concession agreements executed October 2020 and January 2021)
- 2026 proposal: 11 more AAI airports grouped into five bundles for 50-year PPP concessions
The 11-airport tranche continues the same 50-year-concession, competitive-bid model used in 2006 and 2019, but bundles smaller/loss-making airports with larger ones to make bids commercially attractive — reflected in the varying equity IRR estimates (16.7-18.6%) across bundles.
Project IRR vs Equity IRR — Evaluating PPP Infrastructure Bids
In PPP project appraisal, Project IRR measures the return on the total capital employed (debt plus equity) in a project, while Equity IRR measures the return specifically to the private investor's equity contribution, which is typically higher than project IRR because of financial leverage (debt magnifies equity returns). These metrics are standard tools used by government appraisal bodies like the PPPAC to assess whether a project will be commercially attractive enough to draw private bidders.
Key Details
- Estimated project IRR for the 11-airport bundles: 10.7-12%
- Estimated equity IRR for the 11-airport bundles: 16.7-18.6% (highest for the Varanasi-Gaya-Kushinagar bundle)
- Equity IRR exceeds project IRR because private concessionaires typically fund airport projects with a mix of debt and equity, and debt financing leverages equity returns
The government's use of a higher equity IRR band (up to 18.6%) alongside a lower project IRR is intended to make smaller, currently loss-making airports commercially viable when bundled with larger ones for private bidders.
- Number of AAI airports proposed for lease: 11, grouped into 5 bundles
- Estimated minimum private investment: ₹8,622 crore
- Estimated project IRR range: 10.7% to 12%
- Estimated equity IRR range: 16.7% to 18.6% (highest for Varanasi-Gaya-Kushinagar bundle)
- Concession period proposed: 50 years per bundle
- Statutory basis for leasing: Section 12A, Airports Authority of India Act, 1994
- Prior AAI airport privatisation rounds: 2006 (Delhi, Mumbai) and 2019 (six airports, 50-year concessions)