"Indian airport restructuring/ Obstacles to a smooth take-off"

Friday, December 3, 2004

Commentary
Airport restructuring/ Obstacles to a smooth take-off
India - Business Line


In the Delhi and Mumbai airport modernisation, the crucial issue is the lack
of adequate runway facilities. This cramps quick turnaround of aircraft and
the problem is aggravated by the absence of parking bays. The runway issue
is also beginning to hit new foreign carriers wanting to fly into India. The
immediate focus should thus be on building runways and parking bays. The
terminals can come later, says R. Krishnan.

On the road to solving the runway problem?

AT LAST, the process of modernising Delhi and Mumbai airports has been set
in motion with the empowered Group of Ministers approving the nine bidders
who responded to the expression of interest floated by the Ministry of Civil
Aviation in early 2004.

The Airports Authority of India (AAI) has notified the bidders. And the
Request for Proposal (RFP) will be circulated once the project's Global
Technical Advisor, "Air Plan" of Australia, draws up the technical
parameters for incorporation in the RFP which is expected to be out by
January.

Final bids - both technical and financial - could be ready for opening by
mid-2005. But there can be many a slip between the government's intention
and the actual execution of the modernisation project. Already, there has
been a delay of six months and this could get extended once the experience
of some foreign joint venture partners come up for review.

Even as the modernisation process has begun on paper, the Ministry has also
decided to upgrade the Chennai airport on the lines of Delhi and Mumbai and
build five more greenfield airports at Goa, Navi Mumbai, Pune, Kanpur and
Nagpur, which could be designated new international hubs.

As per current estimates, the six airports may cost Rs 6,000 crore provided
there are no time and cost over-runs. The same could also happen with Delhi
and Mumbai projects. But pending restructuring of Delhi and Mumbai airports,
it is necessary to take immediate steps to upgrade the air-side
infrastructure at these two airports to facilitate entry of new players in
the domestic skies.

With the government opting for private participation to modernise airports,
the least one expected was that past mistakes would be avoided. Issues which
hindered airport development should have been ironed out. But no
rectification has been made or else a conscious decision would have been
taken to consolidate activities such as runways, parking bays, ATCs, and so
on, under the exclusive air-side, leaving other activities including
terminal buildings on the city-side.

No passenger/user has complained about the quality of runways or lack of
parking bays. Their grievance mainly related to the quality of terminal
buildings and the lack of ground facilities on the city-side besides the
equipment required to ensure smooth traffic during fog.

The runway is the basic issue at the Delhi and Mumbai airports. Mumbai
handled an average of 400 flights a day in 2003-04, of which 22,000 were
domestic and 15,000 international passengers. Delhi accounted for 330
flights (both landing and take-off), with 17,000 domestic passengers and
12,000 international.

The domestic passenger numbers have been rising rapidly and this has enticed
new airlines to the Indian skies. The problem starts here and needs to be
tackled quickly if the government seeks to avoid being blamed as a spoiler
or playing favourite.

Mumbai runway handles 25 flights an hour during the busy hours from 5 a.m.
to 10 p.m. The peak hour slots are from 6 a.m. to 10 a.m. and 4 p.m. to 9
p.m. Between 10 a.m. and 4 p.m., there are few flights on the metro sector
which yield maximum revenue per passenger. Again, from 10 pm to 5 am, Delhi
and Mumbai airports handle around 17 aircraft movement per hour
respectively. The cramping of runways will limit quick turnaround of
aircraft and the absence of parking bay availability will aggravate the
problem.

Thus, where will new domestic, including the low-cost, carriers go. Cramped
runways and absence of parking bays will finish their business even before
they start and the travelling public would continue to be shortchanged by
restricted competition.

The runway problem is already beginning to hit new foreign carriers wanting
to fly into India as the AAI is finding it extremely difficult to allot
slots at peak hours forcing them to take off from their home stations at odd
times or alternatively land in Delhi or Mumbai at unearthly hours.

This is notwithstanding an advantage India has in offering multiple
destinations unlike the UK, France, Germany or South-East Asia, which are
single destination-oriented for Indians flying out of various Indian cities.

The Government allowing complete open skies for foreign carriers from
November 1, 2004 to March 31, 2005 is already crimping infrastructure.

In the 2004-05 open-sky season, India will receive 1,700 additional
international services, while the infrastructure, mainly runways, will be
the same. About 65 per cent of the new services will be provided by Gulf and
South-East Asian carriers and, thankfully, they are not asking for
night-halt parking.

What is stated above seems appropriate for international flights. But
similar problems also confront domestic operators, besides the parking bay
space availability.

The Government should focus on this urgently; otherwise all talk of
attracting foreign direct investment (FDI) into the domestic airline
business will be like a flight to nowhere.

The failure to resolve the situation or blaming it on bureaucracy will only
compromise Dr Manmohan Singh's Government with crony capitalists who will
use the occasion to perpetuate their monopoly at the cost of competition and
public interest.

If the AAI builds new runways at Delhi and Mumbai and constructs slip-ways
off existing runways, it will substantially enhance their capacity to handle
many more flights, both domestic and international.

This takes us to the next most important factor that is constraining
domestic aviation business and acting as entry barrier.

The availability of parking bays for night-halt at airports in Delhi,
Mumbai, Chennai, Kolkata, Hyderabad and Bangalore has become a limiting
factor. At Delhi's Indira Gandhi International Airport, all 34 parking bays
are fully allotted, so also the 41 in Mumbai, the 21 in Chennai and the 16
at Kolkata.

But the Ministry has asked the AAI to build additional parking bays - seven
each in Delhi and Mumbai besides three each in Chennai and Kolkata. Even
this comes after the Civil Aviation Minister, Mr Praful Patel, took personal
charge of the situation. But there is scope for building 40 more parking
bays in Delhi, 10 more in Mumbai and scores more in Chennai.

Except for Mumbai, where land is the limiting factor that can be overcome
only if the shanties are removed from airport land in the vicinity, there is
no land problem in Delhi and Chennai.

What is required is political courage to prevent entrenched players from
pre-empting parking bay space, like industrial houses in India used to do
during the days of licence-quota-permit raj. Can one imagine what will
happen to India's image if Delhi's modernised and restructured airport with
new terminals fails to come up at least a year before Commonwealth Games are
ready for inauguration in the capital?

One may argue that since the airport modernisation process is on, let new
players wait. But is not the availability of runways (Airbus A
380-compliant) and parking bays of immediate concern? Why not start building
it? The terminals can come up soon after.

Runways and parking bays do not require any special design, while terminals
need aesthetic and best space use approach and can be dovetailed to the
former. Using the modernisation argument will only perpetuate the monopoly
of the entrenched.

The AAI completed a feasibility study for new terminal building at the IGI
Delhi airport in January 1996 at an estimated cost of Rs 715 crore. Building
a new runway would have cost a few hundred crore rupees more. The AAI being
a zero-debt company could have easily raised Rs 10,000 crore through
borrowing. The feasibility plan was made to pass through all government
corridors, including the Ministry of Environment and Forests.

On official instructions, the AAI even got the required information from
Singapore, Bangkok, Kuala Lumpur and Hong Kong airport authorities. But the
Government changed at the Centre and another review of the feasibility was
done in April 1998. Meanwhile, the terminal cost estimate rose. After more
bureaucratic obstacles, the AAI submitted an updated feasibility report at
1999 prices (new cost Rs 874 crore) accompanied by a draft Public Investment
Board memorandum.

This time, the Environment Ministry raised new queries before clearing it in
February 2002. When it came up for pre-PIB, the NDA Government dropped it as
it had decided to restructure Delhi and Mumbai airport. This process itself
went through twists and turns ranging from BOO to BOLT. In fact, the AAI had
even invited global architecture design. Even this was abandoned. It was
only in December 2003 that the Vajpayee Government decided to restructure
the Delhi and Mumbai airports with domestic private and foreign equity
participation.

Significantly, the Ministry of Civil Aviation had in 2002 directed AAI not
to undertake any capital expenditure of more than Rs 10 crore without its
approval. All you could modernise with Rs 10 crore was toilets and washrooms
at metro airports. The status quo has not changed till this date.

The story of building a new terminal at Mumbai's domestic airport was even
stranger. After initiation in December 1993, it was also abandoned in
December 2002, heeding the privatisation argument.

While new terminals could wait to be built, why should runways and parking
bays be on a compulsory wait?


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