The Airports Economic Regulatory Authority (Aera) has approved ₹13,742 crore of Bangalore International Airport Ltd's (BIAL) five-year capital expenditure proposal, representing approximately one-third of the total ₹20,920 crore request. According to reports from Mint, the regulator has implemented a new recovery model where some projects will only be recoverable after assets are completed and put into operational use. This represents a significant shift from the traditional five-year capex recovery model that airport operators previously used. As one executive familiar with the matter explained, this was one factor leading to the deferment of some capex projects.
The reduced capex approval will have direct financial implications for BIAL's revenue recovery capabilities. Aera has approved a baseline yield of ₹390.42 per passenger for Bengaluru airport, which is significantly below BIAL's proposed ₹1,129.23 per passenger. Amit Mittal, director at Delhi-based consultancy Aerointellect Aviation, explained that this means BIAL can recover much smaller amounts from airport users during the five-year period. The lower capex approval also reduces the amount BIAL can seek to recover through regulated airport charges, potentially leading to lower user development fees for passengers. Since August, Aera has revised the concept, with Bengaluru being the first airport where capex recovery will start only after assets come on stream, reducing the amount the airport can charge users upfront.
Among the most significant cuts, the second phase of Terminal 2 saw its proposed budget reduced from ₹7,480 crore to ₹6,030 crore. According to Mint reports, other major projects also faced substantial reductions including the West Cross Field Taxiway (₹1,567.33 crore to ₹1,225.30 crore), T1 upgrade (₹1,129.95 crore to ₹893.22 crore), and T2 Phase 2 apron (₹906.87 crore to ₹760 crore). Of the 34 projects proposed, the majority were cleared but their values have been revised downwards, with BIAL deferring some projects to later implementation periods. Of the 34 projects proposed, the majority were cleared, the BIAL spokesperson said, however their value has been revised downwards.
Several projects were excluded from the regulated asset base after Aera concluded their benefits did not sufficiently justify user charge recovery. The Eastern Connectivity Tunnel was valued at only ₹1,600 crore with 30% (₹480 crore) recognized as allotable expenditure, while the ₹143 crore KIA West Metro station was excluded due to limited passenger benefits. AERA concluded that the station would not primarily benefit passengers and would instead serve employees and commercial and support establishments. The North Boundary Road was also excluded due to insufficient development commitments, with AERA saying BIAL had not shown firm development commitments or sufficient demand to justify the investment in the current control period. The proposed general aviation terminal was also excluded due to limited demand. BIAL, which is majority-owned by Fairfax with the Karnataka government and Airports Authority of India as minority owners, operates the country's third-largest airport that handled 48.16 million passengers in FY26.
BIAL has acknowledged the challenges posed by the regulatory decision while maintaining flexibility in its expansion approach. A BIAL spokesperson stated that the company has deferred some projects to a later period of implementation and will continue exploring alternate funding mechanisms or concession structures. The spokesperson noted that Aera's decision to not allow the full cost of the Eastern connectivity tunnel and other projects are seen as important challenges rather than permanent road blocks. "We will continue to explore alternate funding mechanisms or concession structures, as potential solutions," the spokesperson added. The Bengaluru decision contrasts with Hyderabad airport, where GMR-led GMR Hyderabad International Airport Ltd had its capex proposal reduced by approximately 11% to ₹13,816 crore from the proposed ₹15,400 crore. Airport operators typically spread capex over five years with recovery through user development fees, with most costs factored into airfares, making the regulatory changes significant for passenger charges.
