Bengaluru International Airport (BIA), which will commence operations on May 11, 2008, is supposed to deliver us poor suffering Bangaloreans from the grind and capacity constraints we face at HAL airport.

Given the growth of air traffic in Bangalore over the last few years, however, it will be WE, who will have to learn to fly at times suitable to BIA's convenience, not ours.

I made this graph using data of the Bangalore International Airport Limited (BIAL), production programme for Summer 2008 (March to October 2008).


Time slots are a valuable commodity. Continental Airlines, just paid over $200 million for its landing slots at Heathrow Airport, London, to fly under the new "Open Skies" policy between the US and the EU.

As per BIAL's own data, on its opening date, the new Bengaluru International Airport's (BIA) single runway, is already "fully booked" during the peak travel hours from 6AM - 10AM and from 6PM to 8PM.

The file indicates a maximum of 30 aircraft movements per hour, and you will observe that the 6AM-7AM and 6PM-7PM time slots are actually over booked.

May be BIA operators expect some spill overs in to other hours. It is also important for us to realise that the "Summer" period is the slack period in India for air travel. The Winter period from end October to end March is the peak travel period, when we can expect demand to increase by another 20%.

BIA may have a modular design for the terminal, but a new runway will take at least 2~3 years. The only option to the BIAL consortium will be to give airlines slots in the non-peak hours.

But wait a moment ....... is that not the situation in HAL right now ?

The new Bengaluru International Airport (BIA) will be opened on May 11, 2008.

The Election Commission may not have permitted any festivities and gala celebrations, but then, we Bangaloreans, are more interested in the long overdue additional capacity of the new airport.

Various government agencies are busy upgrading or creating roads, to improve access to the airport for the expected 25,000 vehicles per day, to and from the airport. The road from Vidhana Soudha till BIA is being widened and being made "signal free". The National Highway NH-7 from Hebbal flyover onwards till BIA, will be 8 lanes (6 on the highway, and 2 access roads). All of us, expect vehicles to "fly" on the highway and cover the distance to the new airport in under 20 minutes.

In our rush to ensure quick access to the airport, we have overlooked the pedestrians who need to cross the NH-7 highway, and their safety.

There are people on both sides of the NH-7 highway from Hebbal flyover till beyond Yelahanka, be it in housing colonies, factories, hospitals, schools, or malls. The National Highway Authority of India (NHAI) who is responsible for NH-7, has not provided any form of over-bridges or under-passes.

Those of us who use NH-7 currently, have seen people literally scampering across the highway, in fear of their lives. It is risky, not just for the pedestrians, but also the vehicles, especially two wheelers.

If we do not address this issue soon, I fear it is just a matter of time till serious accidents become the norm.

It is still not too late. The BBMP has designs for ready made Skywalks, which can be erected in less than a month. Advertisers will be happy to pay the Rs. 1.5 to Rs. 2 Crore each Skywalk costs, in return for the advertising rights, or BBMP can put these up themselves, and recover costs by advertising.

The barrier appears to be NHAI. It is the agency responsible for NH-7, not BBMP. The NHAI has grandiose plans for "double decking" the NH-7 like it is doing Hosur Road right now, and making flyovers at critical junctions. All plans on a 2~3 year time frame, at the earliest.

The last thing we all want to see, is a repeat of the recent Mysore Road incident, and a major dharna blocking traffic for hours on end, on the only decent access road to the airport.

Yesterday, a division bench of the Karnataka High Court directed the Union and State governments, and the Airports Authority of India to “explore the possibility of minimising, if not completely removing, the inconveniences and difficulties of the people”, and to immediately consider renegotiating the closure of the HAL Airport and levy of User Development Fee (UDF) on passengers, with the Bengaluru International Airport Limited (BIAL) consortium.

The Indian aviation market led by Bangalore, has revolutionised since the original Concession Agreement was conceived and signed. BIAL has probably realised that it has severely under-estimated the meteoric growth, and along with Bangalore, it is in an assured position, to realise its original profits.

In adopting an accommodative position, BIAL may not earn profits as quickly, as in an exclusive position, but definitely much faster than its original projections, when it commenced this project. In addition to good corporate governance, BIAL will realise the elusive benefit of great PR and community goodwill.

A non-exclusive BIAL will also allow for the areas around Devanahalli to develop societal infrastructure like housing, schools, business parks, etc., and this will reduce the pressure on BIAL and the State Government, and ease the life of employees at the airport.

The court judgement has given both the Union and State Governments, and BIAL, the political cover, to make a sincere effort and it is up to us, the residents of Bangalore, to be vigilant, and ensure, that this time we get a Concession Agreement, one in tune with the changed landscape of the Indian Aviation market, and one truly meeting the needs of Bangalore, and South Karnataka. Not just for our lifetime, but for those of our children also.

The stakeholders, including Bangaloreans, should involve the Indian Parliament's Departmentally Related Standing Committee on Transport, Tourism & Culture. This committee was also cited by the division bench in its ruling. I recommend you write to the Committee Chairman Shri Sitaram Yechury or Karnataka Rajya Sabha MP Shri Rajeev Chandrashekar.

Please do post your views as a comment using the link below.

The persons who filed a Public Interest Litigation (PIL) in the High Court of Karnataka, have won a victory today. It may not be all what they wanted, but it is a victory.

A bench of the High Court headed by the Honourable Chief Justice, today directed the Union of India and the Airports Authority of India to re-negotiate the Concession Agreement with BIAL consortium (promoters of the Bengaluru International Airport or BIA) and arrive at a situation where the inconvenience caused to the public is minimised, if not removed altogether.

This is a golden opportunity for us to redress the anti-competitive flaws in the contract and ensure a long term solution that truly delivers the airport with all the positive aspects of Public Private Partnership (PPP) enshrined.

What is your view ? Please post your opinion using the comments link below.

"Akash rescues Indian air defence after delays hit Israeli Spyder missile purchase....", screams a news headline from December 2007.

The Akash surface to air missile was tested at test facilities of the Indian defence forces in Kolar, most likely, the full fledged test facility of the Electronics and Radar Development Establishment (LRDE). The Kolar test facility is identified in the airspace map of Bangalore (as below), 30 nm east of BIAL, as VOD. VOD in airmap parlance means a Dangerous Area, and pilots, globally, recognise the red colour, and keep out of VODs like the plague.

The air map of Bangalore shows that this facility is proposed to be "shifted" from its existing area to an area somewhere in Sector "E" to facilitate the new Bengaluru International Airport being built by BIAL.

There are no public figures available, but I estimate this facility cost the taxpayers of India about Rs. 300 Crore (US$75 million). I wonder what the shift will cost the Indian taxpayer ?

More importantly, if this shift is being forced due to the commissioning of the BIA, in my humble opinion, the Indian tax payer via the Government of India, should demand, that the costs incurred for the shift, be reimbursed by the BIAL consortium.

I am very interested in hearing your opinion. Please post your on this article using the link below.

The public interface for the DRDO is on their website.

SHUTTING DOWN HAL AIRPORT

BAILing out of BIAL?

URL for this article http://citizenmatters.in/articles/view/88-BAILing-out-of-BIAL?

Pressure on the government to keep Bangalore's HAL airport running is beginning to gain ground. While much of the angst is over traffic snarls, the arguments are substantive and deserve attention.

Even as the launch date of Bengaluru International Airport is nearing, a storm has risen over closure of the HAL airport. A public interest litigation petition filed by G R Mohan, B Krishna Bhat, R K Mishra and others in this matter, was admitted by the Karnataka High Court on Monday, Meanwhile, seven unions representing Indian and Air-India employees have given notice for a nation-wide strike against closure of the airports in Bangalore and Hyderabad.

The government on it's part is committed to close the current airport. It has signed a concessional agreement (CA) with BIAL where one of the terms is to not allow any other airport within 150 kms radius of the new one. As per the agreement, HAL airport is to shut down operations on 30 March when the new airport becomes operational.

Bangalore City Connect, an initiative with membership from the IT/BT industry to address Bangalore's infrastructure issues and the Bangalore Chamber of Industry and Commerce (BCIC) have proposed that the new airport share a traffic of about 4 million passengers with the current HAL airport to avoid congestion at the new airport. The motivation for this proposal is that BIAL cannot handle the projected traffic for 2008-9 anyway, because of rapid growth. In its revised estimates, BIAL has projected a traffic of 13.2 mn for 2008-09 and 23.6 mn for 2013-14. At the time of commissioning the project BIAL had estimated a traffic of only 10.1 mn passengers by 2010 and 13.9 mn by 2015-16.

Speaking to Citizen Matters, Devesh Agarwal, who heads the BCIC Committee on Infrastructure and is a member of the BCC, explained that sharing traffic with HAL is not going to affect BIAL revenues as the new airport will still function at 70 per cent capacity in the first year and over 80 per cent capacity from the second year. This is fantastic by industry standards, he argues. With both the airports functioning, the BCC estimates the traffic to reach 30.5 mn by 2013. Agarwal made a detailed presentation at the Center for Public Policy, IIM-Bangalore recently where he made out a case for keeping the HAL airport open.

"Going by the rate of growth of air traffic in Bangalore, which is much higher than what they had projected initially, BIAL is going to reap a windfall. They know it and is therefore unwilling to give it up," says Agarwal. He is emphatic that they are not against BIAL. "We recognize their role in Bangalore's future. But they should also get the goodwill of the citizens. Their high priced approach is going to have an impact on Bangalore's economy as a whole," he adds.

The Bengaluru International Airport is scheduled for takeoff on 30 March 2008. BIAL Chief Executive Officer Albert Brunner, in statements made to the media, is confident of the airport being fully functional by end of this month.

BIAL is the consortium representing Siemens, Larsen and Toubro, Unique Zurich Airport, the Karnataka State Investment and Industrial Development Corp (KSIIDC) and the Airports Authority of India (AAI) which has developed the new airport.

Among them, Siemens holds the maximum equity stake of 40 per cent, followed by 17 per cent each by Larsen and Toubro and Unique Zurich. The balance 26 per cent is shared equally by AAI and KSIIDC.

Asked to explain how, he says, "Not just passengers but cargo will also get affected since it is an integrated operation. Most of the perishable and other cargo that uses air transport will be impacted by the higher prices they have to shell out. This is eventually going to be passed down to the consumers."

As things stand, unless the government renegotiates the CA there seems no way it can back out of the deal now without breach of contract. Not unless BIAL is willing to take a relook at the clause in the public interest.

There may be scope for renegotiation of the contract. The argument against closure of HAL airport hinges on the fact that the passenger traffic flow calculated by BIAL and presented to the government, was grossly underestimated. The first phase of BIAL, initially being designed to cater to a traffic flow of 5 million passengers has been modified to accommodate 10.3 million passengers, after the Civil Aviation ministry, realizing the higher-than-expected growth, mandated the changes. This modified capacity too is inadequate to handle the volumes expected this year itself.

On the other hand, HAL airport reportedly recorded a 33 percent growth in the nine-month period April-Dec 2007. According to latest reports, HAL airport registered a traffic flow of 9.93 million passengers during this period. It is given this rate of growth that the 2008-09 traffic could actually end up at 13.2 million, which, as noted earlier, places BIAL short of capacity. Many traffic forecasts, still missing the target

The traffic forecast which forms the basis of building any new airport, was in this case undertaken by two agencies; Simat, Helliesen & Eichner, Inc. (SH&E UK), appointed by KSIIDC (Government of Karnataka) in the year 1999 and later by Lufthansa Consulting (LHC). LHC is an independent subsidiary of the Lufthansa Aviation Group which also owns Lufthansa Airlines. SH&E had projected a traffic of only 8.4 million passengers by 2020. BIAL which was one of the bidders for the project, appointed LHC in 2002 to revalidate the SH&E traffic forecast. LHC had projected a traffic of over 8 million by 2010.

In the meantime, some key policy changes happened after 2002. In 2003 the then Vajpayee government announced an open-skies policy for ASEAN countries. What was started by the NDA government was then taken up by the UPA government in 2004, when a new and more liberalized aviation policy was framed. In April 2005 the open-skies policy was extended to the US by the Civil Aviation ministry. It must be assumed that while extrapolating passenger traffic growth, any study would take these factors into account.

By the time BIAL began work on the new airport, it was July 2005. BIAS says that it appointed LHC once more during that year to update the traffic forecasts and develop planning parameters. Yet, despite the rapid changes in policy, LHC seems to have stuck to it's earlier estimates and projected a passenger traffic of only 8.5 to 10.1 million by 2010 and 11.3 to 13.9 million by 2015.

Furthermore, "The BIAL deal was signed during the NDA regime and it was said that HAL will be operating side by side. But, as soon as UPA government came to power it had to sign one more agreement about the closure of HAL airport, as UPA didn't want to have any roadblocks in its policy on infrastructure," says Rahul Chauhan, an aviation enthusiast and analyst. He blogs at review-airlines.blogspot.com.

In reality, air passenger traffic at Bangalore has shown accelerated growth rate back to back. The HAL airport catered to 4.1 million passengers in 2004-2005, 5.6 million passengers in 2005-06 and 8.1 million in 2006-07. Meanwhile, BIAL's projections for 2015 is expected to be breached next year itself!

Concessional Agreement

One explanation for underestimating these figures could be that it gives BIAL more room while negotiating with the government for concessions. For example, let's take the User Development Fee (UDF) that BIAL has been allowed to charge passengers.

In his presentation, Agarwal points out that BIAL will be collecting a UDF of Rs.758 and Rs.1073 for domestic and international passengers respectively. This includes a 12.24 per cent service tax but not the Passenger Surcharge Fare (PSF) levied by the government which is another Rs.225 being currently collected from both categories of passengers. Of this surcharge Rs.70 will go to the operator, in this case BIAL. So the total increase under this head for the passengers works out to a whopping 337 percent and 477 percent respectively!

"Based on the now revised traffic estimates for 13.2 million for 2008-09 and 21.4 million for 2012-13, the operator will collect a cool Rs.523-856 crores every year just from user charges. The total cost of the project is Rs.2500 crores which can be amortised in flat four years," points out Agarwal.

This is unheard of since infrastructure projects of this size usually take anywhere upwards of 15 years to break even. While the business logic favors BIAL, the government has failed to ensure that it's not biased against users of the airport. This is one of the concerns being voiced by citizens.

Member of Parliament from Karnataka, Rajeev Chandrashekar, speaking to leading financial daily Business Standard, on Monday drew a parallel to the Enron fiasco. They too had a contract with the Maharashtra government which involved a high cost of power. Citizens opposed it and the government had to eventually renegotiate the power purchase agreement. Countering the argument by BIAL that there should be no civil airport within a 150 km radius of the new airport, he asked them to be sensitive to the needs of the community they wish to operate in as a business.

It must be remembered that with Enron there was also a "Counter-Guarantee Agreement" with the Center. In the end of course the company itself imploded under the burden of its ambitions.

If you look at the concessions given to BIAL in totality, including the development rights over approximately 4,000 acres of land made available for the project, it starts looking like a huge subsidy. It must also be noted that the reported CA terms are similar to the ones granted to the consortium led by GMR group which has developed the new Hyderabad airport. There, the land allocation for the project is 5,495 acres.

Chauhan, for his part, disagrees with such contracts. "If there's a requirement, there should be another airport for the city. For, Bangalore I strongly believe that it indeed requires HAL along with BIAL," he says. He wonders whether the Aviation Ministry is helping it to grow or is it trying to halt the growth of the industry, with such kind of policies and agreements.

Accessibility - a rough ride ahead

Sheer economics apart, there is also a serious question mark on smooth access to the airport given the traffic and road conditions in Bangalore. The estimates of time taken by passengers from the city to reach the airport ranges from anywhere between 90 minutes to over 3 hours depending on where one is located. In a run from the city press club to the new airport at 7.50 am on Friday last, it took media personnel about 90 mins to reach the airport and 155 mins back into the city. Currently, however, the streamlining of Bellary Road is still on and the road-widening project, is not yet complete.

Frequent fliers, IT and BPO firms and other corporates are going to be hit the hardest, especially those located in the Electronic City and ITPL belt. For them it's not only more operating costs but also a logistics nightmare of just trying to figure out how to get their staff to and from the airport in time.

All said, Agarwal makes a strong case for keeping the HAL airport operational. Given that every estimate of air traffic over the past several years has proven to be wrong by a significant margin, how can we ensure that BIAL will actually service the true demand in the city, he asks.

"It is hard to conceive shutting down a fully functional infrastructure like HAL airport and then discovering that demand outstrips supply, because little can be done at that time," he flatly points out. �

Samuel Jacob

12 Mar 2008

Samuel Jacob is a Bangalore-based journalist. He writes on urban infrastructure, planning and development issues from a ecological perspective. (Note: Statistics used in this report has been culled from analyst presentations, DGCA statistics, and media reports over the past few years.)

Are Private Airports in India Ready to Take Off?

Published: April 03, 2008 in India Knowledge@Wharton

http://knowledge.wharton.upenn.edu/india/article.cfm;jsessionid=a830e6c0e14039162818?articleid=4274&CFID=8109838&CFTOKEN=33128394&jsessionid=a830e6c0e14039162818#

http://www.mynews.in/fullstory.aspx?storyid=3808#

On March 14, Sonia Gandhi, chairman of India's ruling United Progressive Alliance government at the Center, inaugurated the new private sector airport at Hyderabad in the southern state of Andhra Pradesh. It was a false start, though: Several airlines, citing the need for more time to move into the facility, delayed the airport's launch for another week. Just a couple of days earlier, the government in Delhi had asked the country's other high-profile, private sector aviation project -- the Bangalore International Airport (BIAL) -- to postpone its planned March 30 opening until May.

While delays on large projects like these are not unexpected, India's program for privatization of airports has faced opposition from the beginning. On March 12, some 15,000 employees of the Airports Authority of India (AAI), which is responsible for civil aviation infrastructure in the country, went on strike to protest the privatization of the airports in Mumbai and Delhi and the decision to close the currently operational airports in Hyderabad and Bangalore when the new ones opened. Earlier in the month, airport taxi drivers had gone on strike to protest these changes as well.

Strikes may seem trivial in the larger mosaic of airport privatization, but they add weight to the growing opposition to the model of civil aviation infrastructure development that the government has adopted. Unable to fund these projects, the government has turned to public-private partnerships which, in theory, allow it to tap into the efficiency and entrepreneurial problem solving that private companies can offer. But delays, mounting project costs and concerns about monopolies are clouding the horizon of consortium-led projects to upgrade or build new airports. While many feel complete privatization might be the way to go, others argue that airports are a basic component of infrastructure, and as such should exist for public benefit, not profit. The debate is critical: According to the government's own estimate, some 500 airports will have to be set up as greenfield projects or refurbished by 2018.

The two catalysts of India's economic growth have been telecom and civil aviation. They have both speeded up the pace of doing business. But there is a difference. "Telecom has definitely been an incredible success," says Milind Sohoni, professor of operations management at the Indian School of Business (ISB), Hyderabad. "But the wireless revolution has been the big story. Wireless technology has circumvented to a certain extent the infrastructural issues: One doesn't need copper wires to be laid or huge telephone exchanges built. However, on the air transportation side, while liberalization has brought in private carriers and capacities are being added by the day, the need for more physical infrastructure is very high."

Building airports requires a lot of money, and the government does not have it. The total project cost of the Hyderabad airport is $600 million. At Bangalore, the budget is $300 million. A GMR Group-led consortium, which has won the modernization project for the Indira Gandhi International Airport in Delhi, has recently increased its project estimate to $2.2 billion. A similar upgrade for the Mumbai airport by a GVK-led consortium has a budget of $1.3 billion. A new airport is also being planned at Panvel, about 35 kilometers from the existing Mumbai airport, at a projected cost of $2.5 billion. Moreover, these figures tend to be revised -- always upwards.

With the rapid growth in the industry, further investments will be needed. According to the ministry of civil aviation, the number of flights at Indian airports went up from 636,947 in 2002-03 to 1,007,593 in 2006-07. The figure is expected to reach 1,420,130 by 2009-10. The numbers of passengers carried are 48.69 million, 96.40 million and an estimated 144.76 million, respectively.

The airlines have correspondingly increased their fleet acquisitions. The most ambitious is that of the National Aviation Company of India Ltd. (NACIL), the newly-formed entity coming out of the merger of the erstwhile domestic and international national carriers Indian Airlines and Air India. The company has a current fleet strength of 140 and has another 111 planes on order. Others are not too far behind. Air Deccan has 43 planes with 92 ordered, Jet Airways has 75 with 44 ordered and Kingfisher Airlines has 35 with another 60 on the way. Even minnow IndiGo Airlines, with 15 planes currently, has ordered 100.

Negotiating with Devils

The government is in no position to fund the infrastructure needs for this sort of growth, and many planners still belong to the "Hindu rate of growth" era -- their projections are way below the mark. One example is the Delhi-Gurgaon expressway, which has just opened: Traffic on the first day was greater than that projected for 2013.

Public-private partnerships (PPPs) -- all the new airports and upgrade projects fall in this category -- have therefore been largely welcomed. Companies such as Delhi International Airport Ltd. (DIAL) and Mumbai International Airport Ltd. (MIAL) have a 74:26 shareholding pattern, with the private consortium holding the majority stake and AAI and the state government the remaining 26%. The revenue share, however, is loaded in favor of AAI; in Delhi, for instance, it is entitled to 46% of the earnings.

The initial opposition to the PPP arrangement came from the Left, which successfully stonewalled private sector leadership in the Chennai and Kolkata airports. The current model is an AAI-led PPP, which brings none of the private sector skills to the fore. The combined budget for the upgrades is $1.5 billion, so it is likely that the private sector will be given a greater role in the future.

Rajgopal Swami, chief financial officer and spokesperson for the GMR group, says that PPPs are the best way forward. "Traditionally, seaports have provided the impetus to growth in the hinterland around them," he says. "In this century, in the context of globalization, airports are the gateways to a country and will act as catalysts for growth. Privatization provides a means of developing the airport infrastructure space rapidly by spreading the effort over several players. A PPP model allows efficient development of infrastructure by combining the strengths of the public organization with the entrepreneurial skills and business acumen of private enterprise."

The first PPP airport to get off the starter's block was the smaller $100 million Cochin International Airport (CIAL), in the southern state of Kerala. That's been a success story; it has been making a profit since 1999. In 2006-07, on a turnover of around $40 million, its profit after tax (PAT) margin was 35%. While CIAL says such handsome returns are a result of efficient operations, critics contend the company has been overcharging in the absence of competition.

Critics have been more vocal about plans to close functioning airports that pose competition to the new private ones, as in Bangalore and Hyderabad. "The current noise [over the new Bangalore airport] is because a public sector monopoly has been replaced by a private sector monopoly," says Devesh Agarwal, president of the infrastructure committee of the Bangalore Chamber of Industry & Commerce (BCIC). "A public sector monopoly is a relatively known devil and it is a devil with whom the industry and consumers can negotiate. In a public sector monopoly, there is some sense of public propriety. The private monopolies, on the other hand, are there only for profit. That is their guiding principle."

The new Bangalore airport will charge a "user development fee" (UDF) of $22 per international passenger. There was a proposal to levy a similar charge on domestic passengers, but that may not happen as the budget airlines, which are opposed to adding the fee to their ticket prices, have threatened to walk out. CIAL, meanwhile, has stopped charging a UDF.

"The government should not subsidize the UDF," says Agarwal. "It is the responsibility of BIAL to find its own funding and revenues sources." Sohoni of ISB agrees. "Government subsidies [of the fees] may not be the solution," he says. "One needs to think of different ways of funding such capital expenses, for instance, through bonds or private funding."

'No Such Thing as Free Money'

Sohoni feels that complete privatization of airports is not the answer to India's needs, either, especially when it comes to the larger airports. "In fact, that is not the answer anywhere in the world. It has to be some kind of public-private co-operation. In the U.S., it is the local government or municipality that owns the facility, and it then subcontracts a whole bunch of activities to different private entities -- from operations to the strategic management aspect to futuristic decision making.

"At the end of the day, the airports are for public benefit and, if it is complete privatization, there are a lot of issues around who is making the money and whether anything will be done for the public good."

Swami of the GMR group disputes that premise. "While there is merit in the view that the airport is a public good, there is no such thing as free money," he says. "Any government subsidies are actually paid out of government revenues -- read taxpayers' money. A subsidy actually ends up by having the non-user pay for a part of the user's costs. UDF is a method by which the user pays for the use of the facilities."

The revenue model is a very tricky question, according to Sohoni. "On the one hand, there has to be an incentive for private players to come in and there has to be a sustainable business model," he says. "At the same time, it cannot be monopolistic pricing. One has to be careful about who is doing the pricing and how it is being done and what kind of regulations are in place to make it an even playing field."

"Most good airports around the world make more money from their commercial revenues than from their airline revenues," says Albert Brunner, CEO of BIAL. "In India, this is a potential that has not been tapped at all. BIAL expects to make 15% from commercial channels to begin with."

A study by the Delhi-based Faculty of Management Studies points out that airports in India are looked upon as infrastructure providers, when they should be treated as businesses. AAI has not developed any non-aeronautical streams of revenues, and as private sector companies move in to rectify this, fees will eventually come down, say analysts. But that thought won't prevent any unrest in the interim. At London's Heathrow airport, the British Airports Authority, owned by Spanish construction company Ferrovial, has just won the right to hike passenger charges to pay for infrastructure improvements. As in India, the budget airlines are protesting loudly.

Needed: Easy Access

While some problems may be common to Heathrow and Bangalore, there are others that are uniquely Indian. The biggest complaint for fliers in Bangalore is that the new airport is too far away. Supporting infrastructure like roads to and from the airport's location -- the responsibility of the government -- has not yet materialized. Taxis will be charging as much as $25 for an airport drop -- a large sum by Indian standards. By comparison, the earlier airport was very accessible -- as long as traffic jams didn't intrude.

Swami of GMR feels that critics are putting the cart before the horse. "Basic infrastructure like roads, water and sewerage are, of course, needed to set up an airport," he says. "But it is difficult for any other supporting infrastructure to precede the airport because most of this is led by private enterprise, which will wait for the market to mature before investing in anything other than real estate procurement."

"Airports by their very nature have to be set up away from the main portion of the city," says Sohoni of ISB. "Until now in India, air travelers were not a major part of the total traveling population. But now that it has been growing significantly, it is essential to have a simultaneous development of rapid, easy and affordable access to the airports."

"It is the responsibility of the government to create the connectivity in parallel," says Agarwal of BCIC. "But, as we have seen time and again in India, the government tends to abdicate its responsibility. Whoever is building the airport should also be responsible for creating the connectivity. It should be an integrated project."

Agarwal said he may be calling for keeping the earlier Bangalore airport open. But that does not mean he is opposed to privatization. In fact, he feels the first step should be privatization of AAI. "The government needs to get out of AAI," he explains. "In the telecom sector, Bharat Sanchar Nigam (BSNL) was corporatized and competition was introduced. But BSNL did not fold up. Instead it became a leaner, meaner organization and today everyone is benefiting, the operators as well as the consumers."

Agarwal adds that the PPP agreements were handed out at a time when the government was desperate for private investment in airports. "The government has accepted unreasonable demands from the private sector investors," he says, indicating that it may be time to reconsider the current plans. Others seem to agree: The Parliamentary Standing Committee on Transport, Tourism and Culture has recently submitted a report suggesting the government find ways to keep the Bangalore and Hyderabad airports open.

Adding a fresh dimension to this debate is the realization that even when the upgrades of Mumbai and Delhi are completed, capacity will not be adequate. A new airport close to the existing one in Mumbai has been a consideration for some time. Now, an airport has been proposed in Greater Noida, which is about 70 kilometers from the existing Delhi airport. Under the terms of the existing Delhi PPP, there are restrictions on any new airport coming within a range of 150 kilometers, so a reworking of the PPP arrangement is inevitable. One proposed solution may be to lower the AAI's 46% revenue share to compensate the GMR consortium in charge of the Delhi upgrade for the new competition.

But will the new airport be competition? According to another clause, the GMR consortium will get the first shot at developing any new airport around Delhi, if its own bid is within 10% of the highest bidder.

Meanwhile, all of these issues are taking management time away from other issues -- such as better airports.

Brunner of BIAL explains that the International Air Transport Association (IATA) rates airports on a scale of one to five on 27 different parameters, like accessibility, parking facilities and ease of check-ins. Some of the best airports, like Changi and Zurich, are in the range of 3.9 to 4.1. "In India, the best rating that any airport has managed to achieve until now is only 2.6," he says. "According to our agreement, BIAL has to achieve a minimum rating of 3.5 for the new international airport. If we do not achieve this, we are obliged to return the airport to the government."

Hopefully, May 10th will be an event filled for Bangalore.

During the day, we will have polls, and I pray that citizens of Karnataka will choose to replace the stagnation of coalitions, with one party, to lead the way forward.

The night will bring to fruition a long running plan of having a new international airport. News reports indicate that BIAL has been informally given to go-ahead to commence operations from midnight of May 11th.

Many people believe that I am opposed to the new Bengaluru International Airport. Nothing can be further from the truth.

I welcome BIAL airport, but for reasons detailed in other articles in my blog, not exclusively.

I want the best for Bangalore and Karnataka and in my humble opinion, retaining old infrastructure will only help.

But that is for another article.

For now, congrats to the whole BIAL team, and good wishes for the success of the new airport.