PPP Model in Airports

AIBM

January-March 2017

The modernised passenger terminal of Chhatrapati Shivaji International Airport (CSIA) in Mumbai

The ambitious programme of rapid modernisation of airports in the country has an important component of the Public Private Partnership that has already yielded its fruits in airports at Delhi, Mumbai and Bengaluru. Though it had some teething troubles, the PPP model has increased airports handling capacities and, of course, passenger comfort.

Could you help me in locating gate number 8, the airport is big enough to be lost,” said a young woman from a small town in the northern state of Punjab, who was travelling to London to meet her husband. This was the T3 terminal of the Indira Gandhi Airport, New Delhi, built in the year 2010, the year India hosted the Commonwealth Games. With its construction, the international operations of the Delhi airport shifted to this terminal along with the domestic operations of carriers such as Air India, AirAsia, Vistara and Jet Airways. Government’s Air India also shifted its base to Delhi from Mumbai. Spread across an area of 4 sq km, the brownfield IGI airport project was undertaken jointly by the Airports Authority of India (AAI) and infrastructure company GMR group in a PPP (Public-Private Partnership) model. The structure that is made up of 80 pc glass, supported by metal frames, has 78 aerobridges, 168 check-in counters, 92 walkways and 20,000 sq m of commercial space with a mix of restaurants, bars, cafes and fast food outlets. The nine level terminal building is used by 90 pc of the total passenger movement of the IGI airport and has multi-level air-conditioned car park to accommodate 4,300 cars.

At par with infrastructure and facilities of international standards the IGI airport clinched the first position in Airport Council International (ACI) 2014 rankings in 25-40 Million Passengers Per Annum (MPPA) category in the world, rising from the second position that it had bagged in the three preceding years from 2011-13. Served by six domestic carriers connecting to 58 destinations and 56 foreign airlines for 62 international circuits, the airport hosted an average of 885 flight movements a day and handled 40 million passengers in 2014-15.

“The journey was never easy especially after holding the No. 2 mark for last three years. We can now justifiably claim to be the world’s best,” said Delhi International Airport Limited (DIAL) chief executive, Prabhakara Rao. DIAL is the joint venture between AAI and a GMR Group-led consortium that runs the Delhi Airport, in which the GMR consortium holds 54 pc stake while the AAI owns a 26 pc share.

The success stories

The Economic Survey 2015-16, a government’s review of Indian economy, reported that the PPP model employed for the advancement of Indian airports has led to significant improvement in infrastructure and collection of revenues.

During January-August 2016, domestic air passenger traffic rose 23.14 pc to 64.47 million from 52.36 million during the same period in 2015. Passenger traffic during FY 2015-16 increased at a rate of 21.3 pc to 85.57 million from 70.54 million in the FY 2014-15. In July 2016, total aircraft movements at all Indian airports stood at 168,400, which was 14.3 pc higher than July 2015. International aircraft movements increased by 8.2 pc to 32,830 in July 2016 from 30,330 in July 2015. Domestic aircraft movements increased by 15.8 pc to 135,570 in July 2016 from 117,050 in July 2015. Indian domestic air traffic is expected to cross 100 million passengers by FY 2017, compared to 81 million passengers in 2015, says aviation consultancy firm, Centre for Asia Pacific Aviation (CAPA).

With 275 million new passengers, India is among the five fastest-growing aviation markets globally. The airlines operating in India are projected to record a collective operating profit of INR 81 billion (USD 1.29 billion) in fiscal year 2016, according to Crisil Ltd. As highlighted by the Economic Survey, this growth has been boosted by the rapid modernisation of the Indian civil aviation network and upgradations of several key airports, including those through the PPP model.

So far five airports have been developed under this model – Delhi, Mumbai, Hyderabad, Bengaluru and Kochi. While Delhi and Mumbai were brownfield projects, the airports in Bengaluru, Hyderabad and Kochi were greenfield. For the four metro PPP airports – Delhi, Mumbai, Hyderabad and Bengaluru, the share of public sector through AAI or the relevant state government is 26 pc with at least one foreign shareholder. In contrast to the metros, individual retailers, primarily NRIs (Non-Resident Indians) from Kerala, held a large part of the equity of the fifth PPP airport at Kochi, which was in fact the first airport to be built under this model in 1999.

The two private bodies involved aggressively in the PPP model, GMR and GVK, have made dramatic changes in the airport infrastructure of Delhi, Hyderabad, Mumbai and Bengaluru; transforming the passenger experience, increasing the efficiency and the capacity of the airline operators and delivering a decent dividend to the AAI that gets a specified share of the gross revenue from the airport operators as per the PPP concession agreement. During the period of 2007-2012, for instance, the AAI earned INR 20.82 billion (USD 310 million) from Mumbai and INR 26.69 billion (USD 397) from Delhi.

Thanks in part to privatisation, the revenue of the Airports Authority has risen sharply to INR 28.9 billion (USD 430 million) in 2014- 15 from INR 5 billion (USD 74 million) in 2006-07, merely from the two airports in Mumbai and Delhi. “The income received from DIAL and MIAL is being utilised by the AAI for creating infrastructure at its other airports,” says an official of the authority.

The four airports in the main metros together accounted for 53 pc of the total passenger traffic handled by the Indian airports in 2014. This growth in traffic led by the PPP model has also made a significant contribution to the local and national economies, apart from the modernisation of the airports and the changed perception of India in the global market thanks to the improved infrastructure.

Looking Beyond the Metros

Besides the successful PPP model in the key metros, the Airports Authority has also an ambitious plan of its own to cater to the upgradation and modernisation of airports around the country, taking care of not only the city side (the areas open to passengers) but also the air side (the area for technical operations for passenger, freight and aircraft movement and maintenance).

The Authority has also taken a number of initiatives to upgrade airport and airspace infrastructure to cater to the continued growth in air traffic with enhanced safety and efficiency. The comprehensive strategy is aimed at transition from voice to data-link, transition from ground based navigation to satellite–based navigation, augmentation of radar surveillance, implementation of ATM automation, enhancement in ATM procedures, state-of-the-art training and developing a sound R&D capability.

The AAI has already completed modernisation of 60 airports in the country including the metro airports. The authority has already prepared an action plan for modernisation and upgradation of airports in next five years, which is being implemented to provide requisite capacity that would be adequate for the growth foreseen between now and upto 2025-26. The construction of terminal buildings in these airports uses mostly steel and glass structures with large spans and provides flexibility in lay out planning so as to ensure smooth maneuverability for the passengers and good ambience to the terminals. The facilities in these terminal buildings are state-of-the-art and are aimed to improve the passenger safety and comfort.

Automation of the terminal and apron operations, the AAI is establishing the common use IT infrastructure with Common Use Terminal Equipment (CUTE), Common Use Self-Service Kiosks (CUSS) and overall integration of all systems through establishment of Airport Operational Control Centers (AOCC) at airports. The AAI is also implementing the Baggage Re-conciliation System (BRS) for facilitating faster baggage handling and re-conciliation at all major airports. The baggage drop facility and self baggage checking through self-service kiosks has also been introduced. A number of modern solutions such as sensor-controlled elevators, escalators, Passengers Boarding Bridges (PBBs) with Advanced Visual Docking Guidance System (AVDGS) and travellators are being provided in the new terminal buildings.

Ultra-modern Heating, Ventilation and Air Conditioning (HVAC) System is being adopted in the terminal buildings to have better temperature control for comfort of passengers and for energy efficiency. In order to enhance the security surveillance, upgraded CCTV Systems are being provided at all the airports. The AAI is also exploring the possibilities of city-side developments through the PPP model at existing and greenfield airports. Policies are being formulated for land regulation at airports. Efforts are also being made for providing world-class airport facilities in all the major airports.

Adequate Budget Provisions

In order to implement the ambitious programmes for infrastructure upgradation and modernisation, the AAI has also made adequate provisions for the budget. The AAI’s budget for the airports in the current fiscal (2015-16) is INR 19.7 billion (USD 293 million), the 12th Five Year Plan suggests the investment of AAI for 2016-17 to be INR 29.5 billion (USD 439 million). Notably, the AAI has already invested in the modernisation of the airports in Ahmedabad, Kolkata, Jaipur and Chennai. According to RFQ (Request For Quotation) documents, it has spent INR 6 billion (USD 89 million) in the construction of a new terminal building and improvement of aeronautical infrastructure at Ahmedabad airport; INR 2 billion (USD 30 million) in Jaipur; INR 24 billion (USD 357 million) in Chennai and INR 27 billion (USD 402 million) in Kolkata.

The AAI estimates the total project cost as INR 4.72 billion (USD 70 million) in Ahmedabad, INR 5 billion (USD 74 million) in Jaipur, INR 4.92 billion (USD 73 million) in Chennai and INR 3.75 billion (USD 56 million) in Kolkata.

However, based on the decision of the government, the request for qualification documents issued in December 2014, to undertake the operation, management and development of Chennai, Kolkata, Ahmedabad and Jaipur airports through PPP was cancelled by the AAI. Now, the terminal buildings of the Jaipur and Ahmedabad airports will be on O&M (Operation and Maintenance) contract basis, for which action has already been initiated by the AAI.

Building Overseas Partnerships

Besides collaboration with the domestic firms, the government and the AAI are also exploring the possibilities of assistance and partnerships with foreign governments and businesses. During Prime Minister Narendra Modi’s visit to Singapore in November 2015, the AAI and Singapore Cooperation Enterprise signed an MoU in mutually agreed areas of cooperation for Jaipur and Ahmedabad airports. The cooperation may be extended to other airports with mutual consent. At the airports where action of transaction for O&M of terminal buildings is in process, the air side operations will remain with the AAI.

The AAI has also taken an initiative in developing green-field airports at Mopa in Goa, Navi Mumbai, Shirdi and Sindhudurg in Maharashtra, Shimoga, Gulbarga, Hassan, and Bijapur in Karnataka and Kannur and Aranmula in Kerala. The other airports under this initiative are at Durgapur in West Bengal, Pakyong in Sikkim, Datia in Gwalior (cargo) in Madhya Pradesh, Kushinagar in Uttar Pradesh and Karaikal in Puducherry.

The projects at Mopa in Goa and in Navi Mumbai have been opened for bidding. With the Navi Mumbai airport, Mumbai will become the first city in India to have two operational civil airports. This move is aimed at easing the traffic at its current Chhatrapati Shivaji International Airport, which despite modernisation is bursting at the seams already, due to the lack of adequate land for developing additional runways, taxiways and other air-side infrastructure desperately needed for the airport that services the economic capital of the country.

The project had been proposed many years ago, but the work had been stalled due to the issues such as Coastal Regulation Zone (CRZ) permissions and land acquisition from the Project Affected People (PAP) and the environment ministry. It finally received a go ahead from the central government last year. The PAPs whose approval was due until the last minute were allotted land amounting to four times the size of their existing property under the centre-approved Land Acquisition Rehabilitation and Resettlement (LARR) Bill. The cost of the project, therefore, escalated to three times more than what was envisaged in 1998. It now stands at INR 150 billion (USD 2.2 billion).

Navi Mumbai’s City and Industrial Development Corporation (CIDCO) that has been working on the Navi Mumbai International Airport (NMIA), has shortlisted three bidders for the project – GVK-led Mumbai International Airport, GMR Delhi and consortium of NMIA Infrastructure of France with Tata Realty and Infrastructure and plans to invite the Request For Proposal (RFP). The airport spans over the area of 2,867 acres with a terminal building of 5,23,000 sq m and two runways and aims to handle 60 million passengers.

While NMIA would be the second airport servicing a city, Mopa is the second airport to be developed by the AAI in the coastal state of Goa. The current Dabolim airport faces operating and growth restrictions as the facility is shared with the Indian Navy. The state received the RFP in January this year wherein it shortlisted four bidders – AAI (an aviation PSU), GVK, GMR Infra and Essel Infra.

For the final proposal that is due 90 days after the RFP, the chief minister of Goa, Laxmikant Parsekar, announced, “The company that quotes the highest revenuesharing with the state government will be selected as the final bidder.” Similar to the case of Navi Mumbai, the state government of Goa, for the acquisition of land, offered the PAPs four times the value of their properties, adding INR 500 million (USD 7.4 million) to the budget of the project.

While India is trying to add more airports to increase trade and tourism, challenges such as land acquisition and impact on environment and biodiversity need to be addressed more effectively.

In its report, ‘India’s Airport Capacity Crisis’, aviation consultancy firm Centre for Asia Pacific Aviation (CAPA) predicted that the number of passengers at Indian airports would grow by 10.3 pc to 556 million by 2025. While the estimated investment to overcome the crunch is USD 40 billion in the next 10-15 years, this gives an immense opportunity to both AAI and the private players.

This clearly should continue to attract investments from local and foreign players, eager to have a slice of action in making flying a better experience for the passengers and users.