GMR Airports, which runs some of India's busiest airports, including Delhi and Hyderabad, has reported a sharp rise in quarterly profit as air traffic continues to grow, despite headwinds from high fuel prices and geopolitical disruption.
The company reported profit after tax of ₹65.38 crore for the July-September quarter, up 86% from ₹35.06 crore a year earlier, according to Upstox on Thursday, October 29. Total income rose to ₹4,188.49 crore from ₹3,754.38 crore.
However, total comprehensive loss attributable to owners, which includes items such as fair-value changes and currency movements, was ₹80.75 crore, compared with comprehensive income of ₹14.30 crore a year earlier.
Passenger traffic
GMR's airports handled 28 million passengers during the quarter. The company operates Indira Gandhi International Airport in Delhi, India's busiest airport, and Rajiv Gandhi International Airport in Hyderabad, as well as the new Manohar International Airport at Mopa in Goa. It also has international airport interests.
Passenger traffic is the main driver of airport revenue, through charges paid by airlines and passengers, and through spending at shops, restaurants and other services in terminals.
Leadership change
The company appointed Sanjeev Gupta as additional director and deputy chief executive officer, effective October 29. Leadership appointments at airport operators are closely watched, given the complexity of running large infrastructure assets and managing relationships with regulators and airlines.
The business of airports
Airports earn revenue from two main sources. Aeronautical revenue comes from charges levied on airlines and passengers, such as landing fees and user development fees, which are regulated by the Airports Economic Regulatory Authority of India. Non-aeronautical revenue comes from retail, duty-free shops, food and beverages, advertising, car parking, real estate and cargo.
Non-aeronautical revenue has become increasingly important, as it is less regulated and can offer higher margins. Airport operators have invested in developing commercial real estate around their airports, including hotels, offices and retail spaces.
Aviation growth and challenges
India is one of the world's fastest-growing aviation markets, with domestic passenger traffic rising steadily as more people travel by air. Airlines such as IndiGo and Air India have placed massive aircraft orders to meet demand.
However, the industry faces challenges. High jet fuel prices, linked to the surge in crude oil, have raised airline costs and fares. Airspace closures in West Asia have forced longer routes to Europe, and Indian airlines have suspended flights to Saudi Arabia because of attacks by Houthi rebels. Delays in aircraft deliveries from Boeing and Airbus have limited airlines' ability to add capacity.
These factors could slow passenger growth, affecting airport traffic and revenue.
Expansion and investment
Airport operators in India have been investing heavily in expanding capacity. Delhi airport has added new terminals and runways, and Hyderabad airport has been expanding its terminal. New airports, such as Navi Mumbai and Noida (Jewar), are adding capacity in major metropolitan regions.
These investments require significant capital, and airport operators carry substantial debt. Managing financing costs is an important factor in profitability, particularly when interest rates are high.
The privatisation story
GMR was one of the first private companies to operate Indian airports after the government began privatising airport management in the 2000s. The Delhi and Hyderabad airports were among the first to be operated under public-private partnerships. Since then, the government has privatised more airports, with the Adani Group emerging as another major operator.
