17 Mar, 2008, 0600 hrs IST, Nirbhay Kumar, TNN
http://economictimes.indiatimes.com/News/News_By_Industry/Transportation/New_user_fee_for_domestic_fliers_grounded_at_Rs_200/articleshow/2872347.cms

NEW DELHI: In a major relief to domestic passengers, the civil aviation ministry has told developers of the new international airports at Hyderabad and Bangalore to restrict user development fee (UDF) to Rs 200 instead of the initially-proposed amounts that were three times higher. However, the ministry is open to the idea of higher airport charges for international passengers.

UDF is in addition to passenger service fee (PSF) of Rs 225 levied at airports across the country. The ministry's intervention means the GMR-Malaysian Airports team, developer of the Hyderabad airport, and Siemens-Zurich airport consortium, developer of the Bangalore airport, have to restrict UDF to Rs 200 in the case of domestic passengers till the proposed Airport Economic Regulatory Authority of India (AERA) is set up for regulating airport charges.

In the first four months of operation, the new airports are free to levy airport charges of their choice. However, they have to seek government approval for their tariffs after this period and that is when the ceiling of Rs 200 per passengers would kick in.

As of now GMR Hyderabad International Airport (GHIAL) plans to collect Rs 1,000 from every passenger taking an international flight from the new airport. There will be no charge for domestic passengers during the initial period. After this period, domestic passengers would pay Rs 650 each time they depart from the new Hyderabad airport.

Bengaluru International Airport (BIAL) plans to collect Rs 520 from each passenger -- for both domestic as well as international services initially. However, the tariff would increase to Rs 675 in case of domestic passengers and Rs 950 in the case of international passengers after two months.

Passengers are left with no option but to pay the steep levy as the old airports at both cities are being closed. Apart from forking out higher airport charges, passengers are also faced with higher cab charges since the two airports are located outside the cities.

"We may agree to higher UDF for international passengers, but charging a steep fee from domestic passengers is out of question," a ministry official said. It is understood airlines have complained that high airport charges would turn air travel unviable on short-haul routes. The aviation ministry is of the view that developers have long concession periods to recover their
cost and steep tariffs would be a heavy burden on travellers.

"The UDF private developers have proposed is completely unreasonable. But they should remember that they can collect such fees only for 120 days according to the concession agreement. They have to get their fee approved by us after this period. We feel airport charges of Rs 150 to Rs 200 from domestic passengers would be the most reasonable," the official said.

"It's very unfortunate that government is playing the part of regulator by interfering into fixing the tariff. It was expected that regulator would be in place at the time of opening of Bangalore and Hyderabad airports but it has not happened as expected," Centre for Asia Pacific Aviation's India head Kapil Kaul said.

"Lenders gave money to private developers on the basis of their plan to collect UDF as principle source of revenue. The airport projects are funded on debt-equity basis. Incorporating UDF as source of revenue is a necessity for the companies if they have to be viable," he said.

The government has proposed setting up of AERA to regulate airport tariff and create competition among airports. It might take some time before the regulator is put in place as a Parliamentary standing committee headed by Sitaram Yechury is reviewing the AERA Bill. The bill is likely to be re-introduced in Parliament in the monsoon session.

GHIAL, a joint venture of GMR Group (63%), Airports Authority of India (13%), Andhra Pradesh government (13) and Malaysian Airports Holding Berhad (11%), has invested Rs 2,478 crore to build the greenfield airport in Hyderabad. The debt:equity ratio of the project stands at 2.1:1.

For the new Bangalore airport, BIAL, a consortium led by Siemens (40%), Unique Zurich and L&T (17% each), Airports Authority of India and KSIIDC (13% each) has invested Rs 2,470 crore. While equity, state support, internal accruals and security deposits contributed 35% to the total project cost, the remaining 65% was raised as debt.

The UDF component was included in the concession agreement to let developers recover their cost, considering the airport would be new and hence little scope of non-aeronautical revenue such as retail and hospitality. It may be noted here that Kochi international airport, the first private commercial airport in the country, collected a UDF of Rs 500 for many years, finally withdrawing it in January 2006.

In the concession agreement between the government and private developers GHIAL and BIAL, neither the UDF amount nor the period for which it would be collected has been specified.

18-Mar-2008

http://indiaaviation.aero/news/airline/8181/59/Bangalore-International-Airport-Ltd-(BIAL)-will-not-follow-a-cross-subsidization-tariff-policy

According to Banglore HAL International Airport, the new Bangalore International Airport Ltd (BIAL) is likely to spare domestic passengers from the user development fee (UDF).

In recent days GMR Hyderabad International Airport Ltd's (GHIAL) made its decision to charge $25 (about Rs 1,000) as UDF on international passengers from the new airport at Shamshabad, which is scheduled to launch commercial operations 'next week'.

The BIAL, which is destined to launch its operations from 11 May 08, will not follow a cross-subsidization tariff policy. On the other hand there shall a charge of UDF amounting to INR675 on domestic passengers and INR955 on international passengers.

What has been found from the Chief Executive Officer (CEO) of BIAL Albert Brunner is that it would not be fair to levy charges on international passengers and save the domestic passengers when both of them would be using the same infrastructure. Speaking on this Brunner said, "The International Air Transport Association (IATA) can question airports if they charge a fee to international passengers and nothing to domestic passengers when both are using same facilities."

Nevertheless, the recent developments are quite different to the statement of the BIAL Chief. This includes the forceful stances of the domestic carriers who are gearing up to lobby for a waiver of the fee on the domestic sector.

On this Ramki Sundaram, the Chief Financial Officer (CFO) of Deccan Aviation said, "The question is: What impact such a move (charging UDF from domestic passengers), would have on business, especially on short haul routes. Both (airport and airlines) would be at a disadvantage (business-wise). We have requested both airports to take a long-term view on this."

(c) Centre for Asia Pacific Aviation. Date posted: 18-Mar-08.

One March 19th, I received this comment on one of my posts. It deserves posting on the blog. Thanks to the commenter.

There is more than enough commerce in Bangalore to support another airport. Speeding up travel of people and products only improves an economy.

The market place, consumers and producers, determine usage. Government can implement rules of conduct (procedures) but no one, including the self-proclaimed smartest people in the world, often found working in government, can accurately predict a marketplace. The market place determines itself.

If consumers of airport services do not find the airport a convenient and profitable place to do business, it will not be used.

Wednesday, March 19, 2008 5:25:00 PM IST

Aircraft parking requests flood HAL
By Rasheed Kappan, DH News Service, Bangalore:

http://www.deccanherald.com/Content/Mar202008/state2008032058473.asp

Bangalore's HAL Airport will allot parking spaces for at least 40 to 50 business jets within a year.

But amidst a sudden flood of parking requests from corporates across the country, Airport officials are worried about giving a firm long-term commitment. Reason: Unscheduled landings and take-offs of such flights might interfere with regular operations, and pose problems if the airport is later retained for commercial flights.

Highly placed sources told Deccan Herald that several corporates including the Reliance Group, Indus Aviation, the TVS Group, and the UB Group had sought HAL Airport's permission to park their business jets. Since parking is a huge revenue earner for the airport, HAL has reportedly agreed to sanction conditional permission to the companies, it is learnt.

Rs 918 parking charges
For instance, the airport levies Rs 918 per day as parking charge for an ATR-42 aircraft. The daily parking charge is about Rs 3,200 for an Airbus 320 and between Rs 1,300 to Rs 1,400 for a Boeing 737. Parking is free for the first two hours, says a top airport official.

HAL airport is likely to feel the revenue pinch once it is closed after the scheduled launch of the Devanahalli-based Bengaluru International Airport on May 11. Set to lose about Rs 250 crore annually, the parking fee revenues might be small compensation. Yet, the Airport would prefer to keep it, provided it does not run into trouble later if the facility is retained for
commercial operations. While the Reliance Group is keen to park its jet at the airport, Indus Aviation has proposed to use the parking space for two to three of its training facility aircraft.

Aviator India is another firm that has approached the airport to place its two aircraft. Private aviation firm CBAS also wants to park its Hawker 900 XP aircraft at the HAL airport, sources told this newspaper. The UB Group has plans to put at least two helicopters at the parking facility.

Requests to go up
With several business houses poised to acquire private aircraft in the near future, the airport officials expect the number of parking requests to go up shortly.

But the airport is unlikely to allot more than 50 parking slots, sources said.

Doubts over air safety at Devanahalli airport
V. Sridhar

http://www.hindu.com/2008/03/20/stories/2008032057410600.htm

Bangalore: For an airport that was to commence operations in March, now postponed to May, the Air Traffic Control (ATC) facility ought to have been up and running. Instead, on a mid-March morning, just six weeks away from the date of commissioning of the airport, chaos reigns at the ATC facility at the international airport in Devanahalli.

Highly skilled controllers, instead of working at their consoles, are counting tables and chairs and discussing the blinds that should be put on the windows to prevent light from falling directly on the screens that will monitor traffic at the airport.

That the Bangalore International Airport Limited (BIAL) missed the March deadline is well known, but has it also cut corners? Controllers are apprehensive about air safety at the new airport.

In response to a specific question posed by The Hindu about employees’ apprehension that a single lift at the ATC may compromise safety, Albert Brunner, CEO of BIAL, said, “Care has been taken to ensure that safety standards are met as per international standards.” He said the various buildings within the airport “have been built after taking approvals from the respective authorities.”

Controllers at Devanahalli also said the runway lacked central lights, which are embedded along the centre of the runway, to aid visual navigation by pilots as they land or take off.

Many readers have been posting very thoughtful and eloquent comments on my blog. Thank you.

I use part of a comment from one - "If consumers of airport services do not find the airport a convenient and profitable place to do business, it will not be used."

Feedback Business Consulting Services Pvt. Ltd., did a survey of about 1,150 passengers at HAL Bangalore airport. Without belittling electronic, web, or phone surveys, this was a face-to-face survey of actual passengers involving considerable effort, and thus, is the most honest and un-biased opinion, anyone can hope to get.

The survey was conducted between 26/Feb and 1/Mar 2008, from 6AM to 10PM, across a wide cross section of passengers -- frequent vs. occasional flyers, Bangalore/Karnataka residents vs. non residents, business vs. leisure travellers, across gender, across age groups (19 - 55+ years), arriving and departing passengers.

The results :

• 70.7% of those surveyed said they will be adversely or significantly adversely impacted by closure of HAL airport
  
• 81.3% agreed with the statement "I feel that the connectivity to the new BIAL airport at Devanahalli is not yet in place and HAL airport needs to be kept open"
• 71.4% said that all parties should sit down and work out a mutually beneficial arrangement
• Only 19.4% agreed with the statement "I think the government should close HAL airport as set out in the agreement, irrespective of any public inconvenience in the short term"
• 77.8% felt that "Longer travel time to the new BIAL airport at Devanahalli will adversely affect the productivity of businesses in Bangalore"
• 72.5% said "Bangalore's economy is growing rapidly and it is desirable to keep existing infrastructure like HAL airport open to handle rising demand".

Proponents of an exclusive BIAL should learn from the long commutes endured by all Bangaloreans in our daly lives, and the loss of productivity that is resulting. No matter how benevolent or well intended, monopolies only stifle economic activity, never encourage it.

The consumers are speaking and sensible heads in Government, in BIAL, and in HAL, should prevail on the BIAL promoters to listen to the voice of reason, come together, and work out a solution, QUICKLY.

Otherwise, citizens of Bangalore, will act ................. at the ballot box and at the ticket counter ........ at the bus stand and railway station.

Air travel in India has boomed due to the introduction of low cost airlines (LCCs) which have opened air travel to the masses. Their air fares are highly competitive with the upper classes of train fares. Even United Progressive Alliance chairperson Sonia Gandhi said, "air travel was not elitist any more", when inaugurating the new airport at Hyderabad. Despite this boom, less than 2% of India's population travels by air.

Despite many requests from the Ministry of Civil Aviation, the BIAL consortium wants to levy a User Development Fee which I can only describe as excessive.

Currently air passengers in India pay a Passenger Service Fee (PSF) of Rs. 200 + 12.24% Service Tax, for a total of Rs. 225. Out of this 200, Rs. 130 goes to the Central Industrial Security Force and Rs. 70 to the airport operator.

BIAL wants to charge departing passengers both UDF and PSF - totalling, Rs. 983 for domestic and Rs. 1,298 for international, a 437% and 577% increase respectively. In year 1 alone the fees add up to Rs. 524 Crore, and rise to Rs. 856 Crore by year 5. i.e. in these 5 years, the passengers from Bangaore, will pay to BIAL an amount greater than their investment in the airport till date. The justification for these high charges is "a state of the art world class airport".

These prices make BIAL one of the most, if not the most, expensive airport in the world. Add to this the cost to get to the airport at approximately Rs. 800 or higher, depending on your mode of transport. Therefore a passenger will have to spend total of about Rs. 1,800. The airfare to most regional destinations from Bangalore are around Rs. 1,800 - Rs. 2,500.

BIAL is pricing itself out of the reach of the very public it is meant to serve and by extension its main customers -- the airlines.

The high charges proposed at the new GHIAL airport at Hyderabad has already led to a revolt by airlines, who are refusing to operate at the new airport, thus leading to a delay in launch, minutes after being inaugurated.

In Bangalore, low cost airlines are experiencing a 35% drop in their short-haul bookings, and have indicated that they will cut back their operations to Bangalore and deploy their aircraft to other airports.

What is the point of having an exclusive "5-star cost" airport which drives away both the passenger and the airline thus hurting the public interest instead of serving it ?

Does it not make sense to keep a low featured low cost airport like HAL in operation ? After all, as statistics show, there is plenty of demand to make both airports viable.

Sunday March 16 2008 00:42 IST
http://www.newindpress.com/sunday/sundayitems.asp?id=SEC20080315151623&eTitle=Columns&rLink=0
TJS GEORGE

A FRIGHTENING fact about the Bangalore International Airport is now out in the open - that it was going to start regular flights without crucial air traffic control arrangements at the ready. ATC experts had told a newspaper that operations before specialist personnel and calibrated equipment were fully trained and tested would be “imprudent and irresponsible”. The airport company seemed to ignore the warning. Eventually the Civil Aviation Ministry had to virtually order a postponement before the “disappointed” company agreed.

What we see here is a problem of Attitude. Here is a company with a leadership that is obsessed with “recovering the heavy investment” in the airport. To achieve that end, it does not mind paying inadequate attention to safety concerns; it does not mind charging the world’s highest User Fee; it does not mind forcing arriving passengers to hire ‘luxury’ taxis that may cost as much as a thousand rupees for a ride to Electronic City; in the process, it does not mind antagonising Karnataka Tourism and Karnataka taxi owners who have been handling airport traffic well enough these many years.

The big long-term issue is the User Fee. Here too Attitude is the problem. Hyderabad heeded the Government of India’s proposal and abolished the User Fee for domestic passengers. Bangalore said its case was different. (Because its Attitude is different). So a passenger from Bangalore to Chennai will have to pay a User Fee of about Rs 1000 (including tax). Compare this with the highest domestic User Fee in Asia - the Sukarno-Hatta airport in Jakarta which charges the equivalent of 443 Indian rupees. Bangalore’s User Fee should, in tribute to its CEO, be called Brunner’s Ransom.

However, the citizen does have some recourse. Travellers who have spare time (example, holiday makers) have started planning their international departures from Chennai and Kochi. This offers a ready-made business opportunity to an enterprising bus operator in Chennai (and Kochi). An airconditioned coach service from Madras Central Station to the Airport timed to suit international departures is something that will do very well now.

Passengers had already begun shunning Bangalore for short-haul flights, forcing several airlines to plan cuts in their short-haul schedules. If Mysore airport is operationalised, these airlines can turn it into a kind of short-haul hub. Road-rail connectivity to Mysore is already excellent. The runway is apparently finished and terminal building work is well under way.

Best of all, though, how about a new, small, private airport for Karnataka? It will only need someone with, say, 300-400 acres of land. A runway that can handle ATRs will be perfect to cover all centres South of the Vindhyas.

If it can take 737s, it will be right for all of India too. Any location between Kengeri and Bangarpet will guarantee success because it will be ideal for day trippers from Electronic City.

Bangalore has outstanding brand ambassadors who can make this dream project a reality – Captain Gopinath, a proven pioneer; Vijay Mallya, the man with the Midas touch; Rajiv Chandrasekhar, known for his commitment to infrastructure.

It’s an idea whose time has come - the Kengeri Domestic Airport.

Both the Governments (of India and of Karnataka) face a dilemma -- while they realise that there is sound logic, to keeping HAL airport open along with the new Bengaluru International Airport (BIA), they face a intransigent BIAL consortium, who appears hell bent on enforcing the terms of their Concession Agreement.

We should also try and understand BIAL's perspective. They have done their part; so why should they re-negotiate their contract ?

Rajeev Chandrasekhar, Member of Parliament from Karnataka and President of FICCI, summed it up well in this news story in Business Standard. “Commercial contracts and investments made in good faith in our state must not be put at risk. At the same time, it is the government’s obligation and responsibility to ensure public interest is best served. Bangalore International Airport Ltd (BIAL) and its shareholders must as well be reasonable towards a solution - that as long as their investments make reasonable returns, they shouldn’t push to maintain a monopoly”

Thanks to the economic boom in India, the liberalisation of the aviation, and the efforts of the low cost carriers, who incidentally lead the global surge in aviation growth, Bangalore air traffic has exploded; to a growth level just not anticipated, let alone planned for.

In the 33 month period that BIA was being constructed, traffic has grown 255% from 4.1 million passengers per annum (MPPA) to almost 10.8 MPPA. With all due respect to the capabilities of the BIAL consortium, I dare say, there is no infrastructure project in the world, that can plan for, let alone handle this level of growth.

BIAL has independently contracted Lufthansa Consulting (LHC) on two occasions to project air traffic. I am sure these figures are the very foundation on which the consortium planned the financial viability of the project. As per BIAL website these are the passenger figures

Bangalore has crossed, BIAL's "Optimistic" figures for the year 2010, 3 years ahead in 2007. This gap is only widening with each passing day. In November 2007, BIAL made projections to an committee of the International Air Transport Association (IATA) which show that the actual air traffic in 2013 will cross 23.44 MPPA, the "optimistic" number for 2025 i.e. 12 years ahead of schedule. Many seasoned industry watchers believe, that the BIAL projections to IATA, continue to be excessively conservative, and that with both BIAL and HAL operating together, Bangalore air traffic will cross the 23.44 MPPA mark by late 2012 itself.

Industry leaders have made a proposal to keep HAL airport open along with BIAL. Even with diversion of 4 MPPA to HAL, BIAL will handle 135% of its "optimisic" projections in 2010, growing to a whopping 210% by 2015. There is further benefit in this proposal to BIAL. We all know that the limiting factor at BIAL is not the terminal, and most definitely not capabilities, IT IS THE RUNWAY. Since AAI is a partner at BIA, the airport is abiding by AAI policy to boost regional traffic by not charging landing fees to ATR and similar turbo-prop aircraft. Any aircraft large or small, will occupy the same 2 minutes of time on the runway. By allowing HAL to function, BIA can divert this "less profitable" short-haul traffic to HAL and focus on the more profitable long haul and larger jet aircraft.


A commercial venture has to operate in harmony with the community it serves. The past episode of Enron, taught us, that a commercial agreement which impedes rather than promotes its original purpose of serving the public interest, will cause the opposition and resentment from the very public it was meant to serve. The promoters of BIAL should listen to the voices of reason echoing in chorus, and take this proposal positively to re-negotiate their Concession Agreement.

After all they will continue to get their bonanza of profits, but with the added bonus of public satisfaction and harmony.