MARKET WATCH

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 CBS LINE

Volume 3(11)

The Unseen Tollbooths of the Sky: Inside India’s Airport Operator Industry


Warren Buffett famously said that in an inflationary world, the best business is a toll bridge: - a one-time, capital-intensive asset that earns more as time passes. By that definition, India’s airport operators may be the closest thing to modern toll bridges we have. They sit atop essential infrastructure, face almost no competition within their catchment areas, and control a captive audience that grows every year. But what makes their business model so compelling is the quiet sophistication behind their three revenue engines.

The first is aeronautical revenue, the regulated stream generated from airlines and passengers for services such as landing fees, parking, and usage charges. This offers stability but limited upside, as regulators cap returns. The second, and far more exciting, is non-aeronautical revenue, the unregulated zone where airports resemble thriving malls more than transit hubs. Duty-free stores, luxury retail, fine dining, cafés, lounges, advertising, car parking, this is where operators drive margins and aggressively innovate. The third is real estate monetization, a long-horizon value unlock. Think Delhi’s Aerocity: hotels, offices, and entertainment hubs built on airport-controlled land, generating recurring and high-margin income.

This model becomes even more attractive when paired with India’s aviation story. Passenger traffic grew at an 11-12% CAGR from FY09 to FY19, and projections suggest an 8-9% CAGR through 2048, numbers that would make any long-term investor pause. And this growth funnels through a concentrated set of players: GMR, which operates Delhi and Hyderabad and handles roughly 27% of India’s passengers, and Adani, which manages Mumbai and accounts for 23%. Around them sits an ecosystem of proxy plays like Travel Food Services, benefiting from the rising footfalls and steady consumption inside terminals.

For investors, airport operators aren’t just infrastructure companies; they are evolving into diversified commercial platforms. As a greater share of revenue pivots toward high-margin, unregulated segments, these businesses begin to resemble monopoly-style consumer ecosystems rather than mere transport utilities. In many ways, they represent one of the purest long-term proxies for India’s economic and travel growth, a tollbooth not on a bridge, but in the sky.

Arjun Ajith

MSc in Econometrics and Financial Technology

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