BIA-RGIA may tilt at cash counter

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.