There is vigorous growth of air traffic in India in the last decade. The passenger air traffic has increased by more than 10 per cent annually during this time. As per the report of Airbus Global Market Forecast (2016-35), domestic air traffic in India is supposed to increase by fivefold in coming decade. The air traffic movement is also increasing at rapid rate globally which is increasing at the rate of 5.7 % per annum in the last decade whereas the World GDP growth in the corresponding period was only 2.6%. The passenger transport in the last decade has increased by 1.47 billion at the global level. As per the report of International Civil Aviation Organization (ICAO), India has experienced a double digit growth rate of 15.7 per cent in passenger traffic and 9.0 per cent growth rate in freight traffic which is much higher than GDP growth rate of India. The heavy air traffic in India is evident from the India’s revenue passenger km which is 13th in the World with 140.4 billion. This entails creation of air traffic infrastructure for smooth movement of traffic in India. The constructions of modern airports and expansion of existing airports are important addition to air traffic infrastructure. The concept of airport cities or aero city imply development of innovative business ideas within the designated area whose cost-benefits if taken into considerations are more than the cost-benefits of its counterpart in the central business district. Major airports in India such as Delhi, Mumbai, Kolkata and Chennai, Hyderabad and Ahmedabad etc. are growth and employment drivers of Indian economy in aviation sector. There are direct, indirect and induced effects on income and output. However, the calculations are complex as it is related with backward calculation of and calculation of input-output analysis. Further all the airports do not generate the same output and employment. In some airport employment increases but output do not increase simultaneously. As a global practice, the increase in airport infrastructure requires a study of its feasibility in a cost-benefit format. This is carried out in terms of financial and economic viability study. In this study, we have carried out an economic and financial analysis of three major airports in India such as Chennai, Kolkata and Ahmedabad airports for twenty years’ time period. In the cost stream, we have considered capital expenditure and on the benefits side the increase in income, employment, outputs in terms of direct, indirect, induced and catalytic terms. An attempt has been made to measures all these benefits against the cost streams through an economic and financial analysis. The feasibility of investments in airport infrastructure has been calculated in a cost-benefit format to find out the internal rate of return. The robustness of the investment has been tested by carrying out a sensitivity analysis at an increasing cost and decreasing benefits conditions and vice-versa. The calculated IRR both economic and financial are well above the 12 per cent as per the guidelines of Asian Development Bank.
An Economic and Financial Analysis of Chennai, Kolkata and Ahmedabad Airports in India