Terminal Utilisation and Rising Travel Demand Drive Expansion at Tier-II Airports
Mumbai, May 12 — Capital expenditure (capex) at small private airports in India is expected to surge by 50-60% on average between FY26 and FY28, according to a report by Crisil Ratings. This jump comes as these airports undergo capacity expansions to keep up with significantly rising terminal utilisation levels and growing travel demand.In contrast, capex at large private airports is set to decline over the same period, as most of their expansion projects have already been completed or are nearing completion. As a result, the overall private airport capex in India is projected to ease by 10-15%, amounting to approximately Rs 40,000 crore over the next three years.
Small Airports Respond to Passenger Traffic Boom
Crisil’s analysis covers 11 operational private airports and two soon-to-be-operational ones, which collectively handle over 95% of India’s private airport passenger traffic.Small airports, defined as those with a capacity of less than 20 million passengers per annum, include Ahmedabad, Guwahati, Jaipur, Trivandrum, Mangalore, Lucknow, and Goa. These airports are expected to expand their infrastructure by up to 1.5 times their current capacity by FY28.
“Strong demand and the recovery in air traffic have resulted in a CAGR of 45% in passenger traffic at these small airports between FY22 and FY25,” said Ankit Haku, Director at Crisil Ratings. However, capacity growth lagged behind at just 20% CAGR, pushing terminal utilisation levels to 60-90% and creating an urgent need for capacity upgrades.
Declining Capex at Large Airports
Large private airports — those handling over 20 million passengers annually, such as those in Delhi-NCR, Mumbai MMR, Bengaluru, and Hyderabad — have already undergone significant upgrades in recent years. With their terminal utilisation remaining stable at 80-85%, Crisil expects a notable slowdown in new capacity additions at these hubs.“Capex intensity for small private airports will rise to over two times of their EBITDA, but the risks are manageable,” noted Gauri Gupta, Team Leader at Crisil Ratings. She attributed this to the fact that these expansions are happening at existing sole airports in their respective cities, backed by experienced sponsors and robust fundraising capacity.
Regulatory Support and Outlook
The sector also benefits from a favourable regulatory tariff framework, allowing airports to recover capital expenditure costs with a reasonable rate of return, ensuring financial sustainability across both small and large facilities.With traffic at large airports having grown at a 30% CAGR over the last three years, the slowdown in capex offers these facilities an opportunity to fully leverage their expanded capacity.
Crisil’s report highlights a structural shift in India’s aviation infrastructure development, with tier-II airports emerging as the next growth frontier, driven by increasing regional air connectivity and rising passenger volumes.