GMR Group puts expansion plans on hold

Hyderabad: The slowdown in the aviation sector has forced the GMR Group to ‘freeze’ its expansion plans temporarily for the Rajiv Gandhi International Airport (RGIA) and special economic zones (SEZs) near Hyderabad.

Stating this, the Chief Executive Officer, Mr P.S. Nair, explained that at RGIA already excess capacities have been built. Given the slow down, it was not appropriate to go in for additional capex at this juncture.

The sharp fall in domestic traffic and the near term growth forecast have also meant that the capacity created for 12 million passenger traffic a year would suffice for now, he said.

There has been a 9.8 per cent decline in domestic travel and 10 per cent growth in international travellers in the 7-month period since the opening of the RGIA, compared to figures of Begumpet airport last year. With the available indications of a 10 per cent growth average in the entire year, it is expected to see a total traffic flow of 7 million against the projected 8 million, said Mr A. Vishwanath, Chief Operating Officer.

He said the break-even expected at 5 years of operation (extended to five and half years), has now crossed six years. This is essentially because of the User Development Fee (UDF) structure. “Our projects were based on a UDF of Rs 600, but the Government fixing Rs 375 has changed the scenario,” Mr Vishwanath said.

On the phase-II plan for an additional terminal, runway etc, Mr Nair said it was too early to take a call now.

At the moment, the emphasis is on optimising capacity utilisation and increasing efficiencies, austerity measures wherever possible.

How would you combat slowdown? Mr Nair said steps such as aggressive marketing for cargo, international airlines and routes; increase spread on duty free, retail and food & beverages for passengers, promotion schemes for passengers and review of Master Plan are under way.

The company has also not made up its mind yet on what kind of help it could seek from the Government, he added.