Govt wants it to charge only international passengers initially, on the lines of the new Hyderabad airport

Tarun Shukla
New Delhi

http://www.livemint.com/2008/03/27005013/Ministry-new-Bangalore-airpor.html

The operator of the Bengaluru International Airport, Bangalore International Airport Ltd (BIAL) has declined a suggestion from the ministry of civil aviation that it waive a controversial fee it plans to levy on passengers when it opens for operations in the second week of May.

BIAL, a Siemens AG-led consortium, wants to charge Rs240 from each domestic passenger and Rs520 on each international ticket from 11 May for the first two months and increase these to Rs675 and Rs955, respectively, thereafter.

This proposed charge, called user development fee, or UDF, also planned at the new GMR Hyderabad International Airport Ltd (GHIAL)-run Rajiv Gandhi International Airport is in addition to a Rs225 passenger service fee that the Airports Authority of India (AAI) levies on all airline tickets and taxes on such charges. The fee, to be eventually fixed by the Airports Economic Regulatory Authority when it is set up, is designed to partly help the airport developers recover their investments in the new airport complexes.

The other members of the BIAL consortium are Larsen and Toubro Ltd, Unique Zurich Airport (which operates the international airport at Zurich, Switzerland), India's AAI and the Karnataka government.

The Rajiv Gandhi International Airport at Hyderabad, which opened for commercial service on Sunday, has agreed to the civil aviation ministry's request to keep an all-inclusive UDF of up to Rs1,000 limited to international passengers while sparing domestic commuters for at least the
first three months of operations.

BIAL, a senior ministry official said, has written to it saying the airport cannot waive fees as the Hyderabad operator has done and has asked for a meeting with civil aviation minister Praful Patel to explain its stance. A BIAL spokeswoman said the matter was "currently under discussion" with the government.

The government wants BIAL to follow the same structure as Hyderabad as there cannot be two sets of exceptions.

"As it is, there are problems, this is only aggravating it further," said the ministry official, who did not want to be identified, referring to the lack of proper connectivity to the new airport and demands of keeping the old airport open. "We are not in any way saying that (the BIAL) demand will not be considered-partially or fully. All we are saying is that let the transition happen smoothly."

Both BIAL and GHIAL have to submit their total audited financial cost to the ministry after the first three months, following which a final figure for UDF will be calculated based on the shortfall in airport revenues. The charges sought by the two airports as of now, the same official said, are meant to recover the project cost within five years, while the agreement allows that period to be up to 15 years. If the cost is spread out over 15 years, the consequent UDF can be reduced for the passengers, something the two sides can agree once actual costs are submitted by the operators mandatorily.

However, given the current argument and counter arguments between the ministry and BIAL, the waiver on domestic passenger UDF is unlikely to be resolved before the coming fortnight when BIAL is expected to make its presentations.

Meanwhile, the Directorate General of Civil Aviation is likely to complete its technical evaluation of the new Bangalore airport at Devanahalli in the first week of April to grant it an aerodrome licence after which Air India's flight to Singapore at 12.05 hours on 11 May will formally mark the inauguration of the international -airport.

"At London Heathrow Terminal 5 we’ve created a natural, logical journey that’s so calm, you’ll flow through. It should only take ten minutes to get from check-in to departures"

This is the promise British Airways makes about the new super large, super luxurious, $8.6 billion Terminal 5 or T5, at London Heathrow airport. Capable of handling 30 million passengers, this ONE uber-terminal, is 13.76 times bigger than our entire BIAL or RGIA airport in financial outlay.

The reality on opening day ...... 20% flights cancelled, thousands of passengers stranded without baggage, check-in queues so long that check-in itself was suspended and passengers told to either check-in without baggage, or go home or a hotel. The reason offered by British Airways .... "staff familiarisation problems" which lead to a total collapse of the baggage, security, and check-in systems.

At the same time, across the world, right here at Bangalore HAL airport, while a Kingfisher ATR plane is taking off, a dog runs across the runway and crashes in to the aircraft. The impact breaks the nose wheel of the aircraft which skids and blocks the runway. The result, is a 4 hour shut down of the airport with scores of flights diverted to alternate airports. The resultant disruption heaps misery on all stake holders from passengers to employees to cargo.

This form of systemic collapse has occurred before. When Chep Lap Kok, Hong Kong's state of the airport opened, the entire freight terminal collapsed for a period of 2 weeks. The economic impact was felt all the way around the world, with prices of electronic goods and Pentium processors shooting up 500%. Airport closures due to runway disruption have been experienced, not just at Bangalore HAL, but also at India's mega airports, Mumbai and Delhi, and very recently, at London Heathrow airport.

Both incidences highlight, that despite the best planning, best capabilities, and best intentions, things can, and do go wrong. Given the critical nature and role of airports today, it is crucial to have backup systems.

Terminal 5 at Heathrow, may not have any backup options, but in the case of Bangalore, we have the option of keeping HAL airport open instead of closing it down.

In The Times of India, Bangalore, on Tuesday, March 25, 2007, page 22 featured an article by Mr. Albert Brunner, CEO of BIAL. In response to the challenge issued at the end of the article I put forth my own list to debunk certain myths created by BIAL. I have sent this response to The Times of India. Hopefully the will publish it.

Myth : Those who want HAL to continue are enemies of BIAL.

Totally untrue. We want two airports, not one. We welcome BIAL, but not exclusively. With pride, we congratulate the efforts and achievements of the BIAL consortium, including the Governments. We also realise that given Bangalore's growth, we need to consider a third airport in the next 15 years, let alone debate about keeping two airports open today.

Reality : The airport will saturate in the first year.

As per documents filed in court on behalf of BIAL and Ministry of Civil Aviation and its agencies, BIAL capacity ranges from 9 million to 11.5 million. However, BIAL has projected in November 2007, to IATA and airlines, traffic of 13.2 million in the first year itself, implying a capacity shortfall in the first year.

Reality : Runway capacity will saturate at BIAL

The maximum recommended ATM by IATA is 550 per day or 200,000 per year, given certain operational conditions that BIAL has not yet met. Mumbai airport, with India's most experienced air traffic controllers, achieves 720 daily ATMs with 2 runways. 550 from the main runway, and 170 on the second.

Mumbai, achieved 20 million passengers with these 720 daily ATMs. Also, Mumbai has a lot more international flights, when compared to Bangalore, which use large aircraft, and therefore achieve more passengers with fewer aircraft movements. Even, if we discount the advantages of an experienced ATC and larger aircraft, and apply the Mumbai figures to Bangalore, at the maximum permitted 200,000 ATMs per year, the maximum theoretical capacity at BIAL will be 15.22 million per runway. BIAL has projected to IATA and airlines committee traffic of 15.6 million in 2nd year of operation.

The single runways will saturate after one year.

As per BIAL the second runway is expected to be commissioned only in 2012 or 2013. What about growth in the interim period ? Even on a war footing, BIAL cannot construct a fully operational runway with required rapid exit and parallel taxiways in 1~2 years.

Reality : BIAL continues to under-estimate Bangalore's growth

In 2005, just before airport construction started, BIAL appointed Lufthansa Consulting, projected a "most optimistic" estimate of Bangalore air traffic, in 2010 at 10.19 million passengers, and in 2015 at 13.92 million. Bangalore air traffic crossed the 2010 estimate in 2007, and will cross the 2015 estimate in 2008. In the 3 years approximately, that BIAL took to construct the new airport, the air traffic has grown 255% from 4.1 million to 10.5+
million; a growth just not anticipated, let alone planned for. Since 2002, Bangalore air traffic has doubled every 3 years i.e. a CAGR of 33% per year. Yet BIAL continues to estimate growth, even today, at only 12.45% per year over the next 5 years. Why ?

Myth : BIAL will achieve a capacity of 50 MPPA (Million Passengers Per Year)

BIAL claims an ultimate capacity of 50 MPPA (Million Passengers Per Year). The only airport in the world which serves 50 MPPA with two runways is London Heathrow; consistently voted as the "worst major airport in the world", that too with 5 terminals compared to 2 at BIAL. The Mumbai experience detailed above shows us that BIAL can grow to a maximum of 30.5 million passengers; which will be achieved by 2016 even by BIAL's ultra-conservative growth rates.

Myth : You need 100 million passengers to justify 2 airports.

New York had 3 airports, when the traffic was only 4.33 million. Today, these three airports have grown TOGETHER, to serve 100 million passengers. India is clubbed in the world economies with Brazil. Sao Paulo and Rio De Janeiro, each have 2 airports, an in-city smaller airport handling only domestic flights, operating in parallel, with an out of city larger airport which handles both international and domestic flights. In both cities, both airports are commercial successes.

Myth : BIAL is fully prepared for the air cargo needs of Bangalore.

45% of Bangalore's total trade, over Rs. 50,000 Crores, is sent as air cargo every year. The air cargo complex at BIAL is not fully ready. Only Menzies aviation warehouse is fully ready. AI-SATS is not. In any case, these two operators only service the airlines. BIAL is now doing fire-fight planning, erecting office facilities for the over 350 cargo and customs agents who service the needs of industry, but that is at least one year away. BIAL can look to the existing warehouse operators MSIL and AI JWG as an interim warehousing facility. India spends over 13% of its product costs in logistics costs compared to less than 6% in the developed world, which BIAL represents.

Concern : Aero India show

Aero India show at Yelahanka Aviation and aeronautics is the next boom industry for Bangalore. Governments of India and Karnataka, and the Indian Air Force have invested crores of rupees developing the infrastructure at Yelahanka Air Force Base and promoting Aero India show. BIAL is about 4 nautical miles away. Will Aero India become another casualty as a result of
BIAL ?

A hearty congratulations to Rajiv Gandhi International Airport (RGIA) at Hyderabad for finally getting operational. Similar congratulations are due to BIAL very soon.

An even heartier and resounding congratulations to the domestic airlines, for showing to RGIA management, what we individual consumers will be unable to -- even a monopolistic airport cannot expect to charge unreasonable fees.

The ground handling agents at RGIA, Menzies Aviation and Air India - Singapore Air Terminal Services (AI-SATS), who incidentally are the cargo handling agents at BIAL, wanted to charge airlines 200% of their present costs. Airlines are bleeding losses and rebelled at this move. They outright refused to operate to the new airport. The RGIA management quickly back-tracked and the Government of India allowed airlines to continue to do their own ground handling. Naturally, the royalties due from the two ground handling agents to RGIA, has been slashed from 25% to 5%.

For the airlines, deploying their aircraft to an alternate city is a viable option. There is enough demand across the country. The loss would have been felt by the average citizen of Hyderabad and the management of RGIA.

Airlines have threatened a similar action if BIAL imposes unreasonable charges on them. So the costs will have to be borne by you and me, the individual traveller.

Lest we forget, Menzies and AI-SATS are the cargo handling agents at BIAL. If they have a similar price hike planned for Bangalore, be ready to pay more for everything from computers to cell phones, to fruits.

As Edward R. Murrow put it -- "GOOD NIGHT AND GOOD LUCK"!!!!

Date:24/03/2008
http://www.thehindubusinessline.com/2008/03/24/stories/2008032450560600.htm

Madhumathi D.S.

Bangalore operator likely to steal the thunder

Neck-and-neck

BIAL expects traffic of least 11 million passengers the first year, while Hyderabad expects 7 million

Cargo movement at Bangalore is 1.25 lakh tonnes, almost thrice Hyderabad's 43,000 tonnes.

The two new international airports could well be another hare-and-tortoise story. The GMR consortium-built Rajiv Gandhi International Airport (RGIA) at Hyderabad may have stolen a small march, time-wise, over the Bengaluru counterpart by opening on March 23. However, a launch hiccup apart, it looks like the Bangalore operator will be stealing the thunder eventually at the cash counters.

BIA's promoter consortium Siemens-Unique Zurich-L&T may have hit a gold-mine at Devanahalli, going by just the air traffic numbers, according to what Business Line gathered from neutral industry-watchers. Airport company BIAL (Bangalore International Airport Ltd) has not shared any revenue expectations so far.

By BIAL's reckoning, Bengaluru should be ending the first year with at least 11 million passengers and grow at 20 per cent each year. Hyderabad, which has seen similar investment of nearly Rs 2,500 crore, expects traffic of some 7 million.

This traffic will be the main revenue source initially, and the user fees to be levied on departing passengers is seen as a major cash cow, apart from air-side revenues such as landing-parking fees; and royalties from cargo and ground-handling agencies.

FIRST TO POST

Bangalore's attraction for airlines will be undeniably greater than Hyderabad's, and it could break even in the second year itself, one observer said. If HAL airport last year made a turnover of Rs 650 crore, BIAL could make at least thrice that figure during the first full year. Similar international airports break even in seven-eight years. The prime 4,000-acre airport land is another golden goose, as land rates have appreciated sharply to a couple of crores an acre.

On the flip side, BIAL is straightaway mulling another expenditure for a second runway and terminal expansion at Rs 2,500 crore. Also, the 40-day delay until May 11 may have meant a revenue dent of around Rs 150 crore a month, the observer reckoned. The Bangalore project was always a tad ahead of Hyderabad: re-conceived in the public-private form in 1999; awarded in 2001; its CA (concession agreement) signed in July 2004, five months ahead
of Hyderabad.

The two have been neck and neck, paving the same odds; and completed at the same time at comparable costs. They even eye the same pie in the sky and on ground.

BIAL seeks to handle 420-440 movements a day (HAL is creaking at 350 civilian movements). Growing at 30 per cent annually, Bangalore is set for 13 million in the second year and 15 million in 2012.

LUCRATIVE GROWTH

Bangalore's air traffic started galloping in 2002, but everyone misread it. It has soared almost five-fold in seven years: from 2.3 million in 2001, to 3.5 million in 2002, when the shareholders came on; to 5 million (2005) and now 10-11 million (2007).

In fact, Lufthansa Consulting in 2005 had forecast 8.7 million traffic for 2010. So much so that BIAL had to insert a Rs 500-crore or 40 per cent expansion midway through the construction. Cargo, too, looks lucratively poised at Bangalore; the present movement of 1.25 lakh tonnes at Bangalore is almost thrice Hyderabad's 43,000 tonnes.

Indian airports earn 75-80 per cent of their revenue from aeronautical business and the rest from non-aero activities, such as duty-free, retail and F&B. This is just the opposite of the European model, after which BIA is fashioned.

Devesh's notes :

The traffic at HAL airport has crossed 10.5 MPPA (Million Passengers Per Annum) by the end of 2007. BIAL has projected a traffic of 13.2 MPPA for its first year of operations, and 15.6 MPPA for the second. Therefore, the financial returns to BIAL consortium will only be at an accelerated pace. However, the demand for a second runway has moved to NOW!!, which begs the question, what will Bangalore do for the interim period ? Unlike terminal capacity, runway capacity is inflexible.