September 21, 2024
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Stock Market

Can GMR Airports make a turn around and become a profitable company?

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Stock Market

Can GMR Airports make a turn around and become a profitable company?

Airports are more than just gateways to destinations; they are complex hubs of activity that require seamless coordination. Behind every smooth takeoff and landing, there is an intricate web of airport management services at play, ensuring the safety, comfort, and efficiency of operations. From ground handling and air traffic control to security checks and passenger services, these teams work tirelessly to maintain the rhythm of daily operations.

With technology advancing and air travel booming, the demand for effective management has never been greater in India. As air travel continues to surge, driven by the growing middle class and increased connectivity, the need for efficient airport management services has become crucial.

By optimizing logistics, improving passenger experiences, and ensuring timely operations, airport management services play a pivotal role in shaping the future of global travel. Their work ensures that everything functions like clockwork, making air travel safer and more efficient. One such company that should be the focus of stock market enthusiasts is GMR Airports. In this article, we will be seeing whether GMR Airports is undergoing a turnaround story.

Industry Overview

Airport management services keep our air travel running smoothly. These vital services cover everything from passenger check-in to runway maintenance. As more people fly each year, airports are getting busier and more complex. The industry is growing quickly. In 2024 the global airport management services industry is worth about $137 billion.

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By 2032, it’s expected to reach nearly $500 billion. That’s a huge increase in just 10 years! It portrays a 17.9% CAGR growth. Why such fast growth? More people are traveling by air. Also, airports are offering more services to make flying easier and more enjoyable. Things like better shops, restaurants, and lounges are now common. Self-check-in kiosks and biometric scanners are making the process faster. In the future, we might see even more exciting changes, like robot assistants or virtual reality entertainment.

Company Overview Of GMR Airports

GMR Airports stands as a titan in the aviation industry, founded in 1978 ventured into the airport industry in the early 2000s, and has since become one of the top five global airport developers. As India’s largest and the world’s second-largest private airport operator, they manage an impressive portfolio of nine airports. Their crown jewels, Delhi and Hyderabad airports have earned the title “Best Airport” in the Asia Pacific for their respective passenger categories.

With a staggering operational capacity of 14.2 crore passengers and an additional 46 million under development, GMR isn’t just big – it’s growing fast. They handled a whopping 12.1 crore passengers across their gateways in FY24.

Moreover, GMR holds a treasure trove of 2,520 acres for real estate development. Looking ahead, their long-term concessions and rated capacity of 39.4 crore passengers position them perfectly to capitalize on India’s booming air traffic, which they already command 27% of.

Airports Under Development/Operations

The group currently operates key airports such as:

Delhi International Airport
Hyderabad International Airport
Manohar International Airport in Goa.

Under Development:

Civilian Enclave at Bidar Airport in North Karnataka (under a concession agreement with the Government of Karnataka, operations are due to start).
International greenfield airport at Bhogapuram, Vizianagaram, in Andhra Pradesh,
Nagpur Airport

GRM Airports Infrastructure India Limited is the only Indian firm to operate International Airports. Some of the International airports that the company currently manages or is developing are:

Kualanamu International Airport in Medan, Indonesia (developed and run through a partnership with Angkasa Pura)
Mactan Cebu International Airport in the Philippines (Partnership with Megawide Construction Corporation, will operate as the Technical Services Provider until Dec’26)

Under Development:

Kastelli Airport in Heraklion, Greece (Collaboration with Terna S.A., a Greek infrastructure firm)

Aero Services by GMR Airports

GMR Airports offers a wide range of services both within and beyond the airport sector. Here’s a breakdown of their key offerings:

Airport Services

Comprehensive terminal operations
Engineering and management for electro-mechanical, civil, and technical systems
Airside rescue and firefighting services
Airport Operation Control Centre management
Bridge-mounted equipment services
Private charter and FBO services

Beyond the runway, GMR extends its expertise to:

Security solutions, including manguarding and cyber security
Energy and building management
Specialized training programs
Innovative drone solutions and fire services

GMR Airports doesn’t just run airports – they’re reshaping the entire aviation landscape. From the moment you step into the terminal to the behind-the-scenes operations, their services ensure a smooth, safe journey. But they don’t stop there. GMR’s reach extends far beyond the tarmac, offering cutting-edge security solutions and energy management to businesses of all kinds.

Whether it’s training the next generation of aviation professionals or providing drone technology, GMR is at the forefront of innovation. Their consultancy services round out the package, sharing their wealth of knowledge in areas like environmental management and end-to-end airport planning.

Merger and Restructuring of Shareholding Pattern

GMR Airports Infrastructure Limited has formed a strategic partnership with Groupe ADP, granting the latter a 49% stake in GMR Airports Limited (GAL). This alliance aims to create a leading global airport network, prioritizing sustainability, passenger experience, and cutting-edge innovation in airport services and operations.

Before the merger, GMR Promoters held 58.9% of GMR Airports Infrastructure Ltd (GIL), while the public owned 41.1%. Groupe ADP controlled 49% of GMR Airports Ltd (GAL) which has a subsidiary company company under GMR Airports Infrastructure Ltd.

After merging, the ownership structure changed significantly. Now, Groupe ADP owns 32.3% of GIL directly. GMR Promoters’ share decreased to 33.8%, but they remain the largest single shareholder. The public’s stake slightly decreased to 33.9%. This restructuring brings minority shareholders closer to airport assets and cash flows.

Passenger Growth

Passenger traffic experienced notable growth across key cities in FY24. Delhi saw a 12.8% increase, reaching 7.37 crore passengers, up from approximately 6.53 crore. Hyderabad followed with a 19.3% rise, totaling 2.5 crore passengers, compared to 2.1 crore the previous year.

Mopa (Goa) witnessed a massive 566% surge, jumping from just 6.6 lakhs to 44 lakhs. Medan grew by 11.3%, climbing to 73 lakhs from 65.6 lakhs. Meanwhile, Cebu recorded an impressive 46.6% increase, reaching 1.04 crore passengers, up from around 71 lakhs. Overall, total passenger traffic saw a strong 20.1% growth, reaching 12.08 crore.

Asset Wise Performance – (Airport Revenue Diversification and Growth)

Non-Aeronautical Sources Drive Profitability

Delhi and Hyderabad airports leveraged diverse non-aero revenue streams to boost profitability. Delhi’s non-aero income surged 19% year-over-year to ₹2940 crores, with retail dominating at 28% of the total. Retail revenues alone jumped 21% to ₹830 crores, buoyed by duty-free sales of ₹997 per passenger.

Hyderabad saw even stronger non-aero growth at 24%, reaching ₹570 crores. Retail again led the way, comprising 31% of non-aero income and growing 28% to ₹180 crores. Both airports benefited from increased commercial offerings and higher passenger spending.

Traffic Recovery Fuels Aeronautical Gains

Robust passenger growth drove aeronautical revenue increases across airports. Delhi’s traffic rose 13% year-over-year, with international passengers up 24% to 1.95 crores. Hyderabad experienced even stronger growth, with overall traffic climbing 19% and international travelers surging 24% to 42 lakhs.

This influx, particularly of higher-yielding international passengers, bolstered landing fees and passenger charges. Goa’s new airport also contributed significantly, handling over 44 lakh passengers in its inaugural year. Medan Airport of Indonesia has also seen a significant jump in traffic although the company started operations in July 2022.

Going forward the company expects to increase the traffic and revenue per person further. The company is trying to increase the connectivity of the airport by adding a higher number of airline carriers to make it one of the well-connected airports in Southeast Asia.

Strategic Diversification Enhances Financial Resilience

Airports expanded beyond traditional revenue sources to strengthen their financial positions. Delhi’s cargo volumes grew 12% to 10 lakh tons, generating ₹400 crores in revenue. Advertisement income saw remarkable growth, increasing 22% in Delhi and 49% in Hyderabad. Space rentals remained a steady contributor, accounting for 19% of Delhi’s non-aero revenue.

Hyderabad capitalized on car parking fees, which rose 16% to ₹110 crores. This multi-faceted approach helped mitigate air travel volatility and enhanced overall financial performance.

Future Outlook Of GMR Airports

Catalysts driving GMR Airports’ future breakout growth:

A strong presence in profitable Asian markets, particularly in India, where the aviation industry is predicted to grow by 7% a year until 2040.
An advanced tariff structure for Aero Revenue that guarantees a steady flow of cash. Delhi Airport’s impending pricing determination will greatly increase revenue.
Creation of the “GAL Platform” to reach non-aero companies by utilizing India’s robust purchasing patterns.
Priceless holdings of more than 2,000 acres of real estate with significant room for expansion.
Organic growth from almost-finished airport expansions in Goa, Hyderabad, and Delhi increasing EBITDA.
A variety of growth tactics, including expanding to new airports and making use of hub potential.
A track record of collaboration with top companies in the sector, such as Fraport and Groupe ADP.

These elements set GMR Airports up for remarkable expansion and success in the future.