Turbulent Take-Off: Bangalore international airport starts operations

The IT capital of India got a new international airport in March 2008, following the closure of commercial operations by HAL. The surge in traffic demand led to the development of one of the most modern airport facilities in India at the time. The story of what went into building Bengaluru’s world-class airport, the planning, the costs, the commissioning and, of course, the many challenges associated with it…  

The Silicon Valley of India is now serviced by the new Bangalore international airport that started operations on March 24, 2008. The IT capital of India, which has, over the years, become a major hub for the pharmaceutical and biotechnology sectors as well, can now boast of having one of the most modern airport facilities in India.

The old airport at Bangalore, operated by Hindustan Aeronautics Limited (HAL), has been closed down for commercial operations. The HAL airport handled 10.12 million passengers and more than 178,000 tonnes of cargo in 2007-08. According to the Airports Authority of India (AAI), the passenger handling capacity of the HAL airport was 3.25 million passengers, implying that the airport was handling more than three times its rated capacity. In this light, the new airport, with a handling capacity of 11 million passengers, will provide great relief to passengers arriving and departing from the city.

The Karnataka government and AAI each hold 13 per cent equity in Bangalore International Airport Limited (BIAL) while the balance 74 per cent is held by a consortium of Siemens, Germany (40 per cent), Unique Zurich, Switzerland (17 per cent) and Larsen & Toubro (17 per cent). BIAL is developing the airport on a build-operate-transfer basis with a concession agreement for 30 years and an option to continue for another 30 years.

The greenfield airport occupies approximately 4,050 acres of land, provided by the state government on concessional rent. The development of the airport was scheduled to take 32 months from the start of construction in July 2005. However, even as the airport authorities continued to report that work being undertaken at the airport was on schedule, last-minute hurdles forced the airport to defer the commencement of operations from March 30, 2008 until May 24, 2008. At 12.05 a.m. on May 24, Air India became the first airline to take off from the new Bangalore international airport.

According to the master plan, the airport is to be developed in several phases, with the initial phase coming to an end with the opening. Under this phase, a passenger terminal for both domestic as well as international passengers with a total floor area of approximately 71,000 square metres and capacity to accommodate 2,733 passengers at peak hours has been constructed.

A 4,000 metre long and 60 metre wide runway has been constructed on the northern side of the airport complex as have three rapid exits and a taxiway system, 42 code C aircraft stands, and eight passenger and boarding bridges including one double arm aerobridge.

For cargo operations, a dedicated bay in the terminal apron has been earmarked for freight aircraft. However, as cargo is expected to expand over the years, the master plan has earmarked an area for a dedicated cargo apron. A consortium of Singapore Airport Terminal Services (SATS)/Air India and Bobba Group/Menzies Aviation has been selected to develop this facility to an annual handling capacity of 300,000 tonnes.

While the airport has opened with a capacity to handle 11 million passengers, the master plan focuses on making the new airport capable of handling 50 million passengers. Additional phases of the project, incorporating more facilities, will be based on projected passenger traffic and growth requirements.

However, the estimation of traffic growth has not been an easy task for BIAL. Unprecedented growth in the aviation industry concomitant with Karnataka’s overall growth has meant that all earlier estimates of BIAL seem inadequate. When the project was initially designed, BIAL had estimated that the traffic volume will be approximately 5 million passengers in the first year of operation. However, this level of passenger traffic had already been achieved by the time the time construction started. BIAL had to significantly increase the scope of the project.

It later estimated that passenger traffic will reach 10.19 million in 2010; however, with present growth rates, passenger traffic will surpass that estimate much sooner. Taking this into account, BIAL has decided to construct a second runway by 2014, which will enhance the capacity to about 40 million passengers a year.

Meanwhile, BIAL has signed key agreements with many service providers. For the aviation fuel facility, a consortium of Skytanking and Indian Oil has built, and will operate, the fuel farm and hydrant system of the airport on an open access basis. The estimated cost is Rs 900 million and the duration of the contract is 20 years. This facility is now the second aviation fuel facility to operate on an open access basis in India after a similar facility opened in the greenfield Hyderabad international airport on March 23, 2008. Meanwhile, into-plane fuelling service at the airport is being provided by two consortiums consisting of Bharat Petroleum Corporation Limited, ST Airport Services Private Limited and Indian Oil-Skytanking.

The ground handling services will be provided by GlobeGround India and Air India-SATS, which will also procure the equipment required. A consortium led by LSG Sky Chefs and TajSats will run the new BIA Air Catering unit for the 15-year contract period and BIAL has reserved the right to award a third licence for air catering at a later stage.

The estimated cost of the airport project is Rs 24.7 billion, much higher than the Rs 14 billion estimated earlier. The project was earlier proposed to be financed by state support from the Karnataka government in the form of an interest-free repayable loan (Rs 3.5 billion), a loan from an ICICI Bank-led consortium (Rs 7.35 billion), and equity from all shareholders (Rs 3.15 billion). Later, the project cost was revised to Rs 19.3 billion. Of the additional amount, Rs 4.61 billion was to come in from the lenders and Rs 685 million from the service providers, raising the debt-equity ratio from 2.25:1 to 4:1. The project cost was revised for the third time in September 2007 to Rs 24.7 billion. The additional cost is being met through equity, debt and internal accruals.

Given that the new airport is at Devanahalli, 35 km away from the city centre, connectivity of the airport to the city has drawn a lot of attention. BIAL has spent an additional Rs 1.17 billion to construct a two-lane trumpet flyover at the intersection of the main access road and National Highway-7.

Other connectivity enhancement plans include the construction of a six-lane access- controlled expressway, which will reduce the distance to be travelled from the city to the airport to 21 km. The expressway project, being carried out on a build-own-operate-transfer basis, will cut through 26 villages between north Bangalore, KR Puram and Devanahalli. The construction of this expressway was being undertaken by the Karnataka government till January 2008 when the state government decided to hand over the construction to the National Highways Authority of India to speed up the project.

The Karnataka government has also cleared the proposal to create a metro rail link between central Bangalore and the new airport on a public-private partnership basis. A special purpose vehicle called Bangalore Metro Rail Link Limited has been incorporated for the project and the government plans to rope in the Indian Railways, Bangalore Metro Rail Corporation, Bangalore Development Authority, BIAL and Greater Bangalore City Corporation as stakeholders of the project. The estimated cost of the project is Rs 38 billion and the new track is to be laid next to an existing track to minimise acquisition of land.

For more immediate connectivity amelioration, BIAL has finalised an airport shuttle service with the Bangalore Metropolitan Transport Corporation (BMTC). BMTC in turn has procured 40 air-conditioned Volvo buses for dedicated shuttle services between the airport and seven destinations across the city while also procuring 116 Ashok Leyland non-AC buses. Parking space for around 2,000 cars has been provided.

Even with these arrangements, IT companies, among others, in Bangalore have expressed concern over the distance to be covered by road to catch a flight. Pressure has mounted on the Karnataka government to retain operations at the old HAL airport even after the greenfield airport has become operational. This demand particularly holds for short distance flights.

However, according to the concession agreement signed between the Government of India and BIAL, no new or existing airport will be permitted to operate as a domestic or international airport within 150 km of the new airport. Even as discussions continue between BIAL and aviation authorities, the Ministry of Civil Aviation has reiterated that it will honour the contractual agreement and closed the HAL airport.

Another issue surrounding the airport and yet to be resolved is the higher cost of travel due to a user development fee (UDF) that BIAL will charge. All outbound passengers from the Bangalore international airport are now paying Rs 1,070 as UDF. A charge, of Rs 655, will be extended to outbound domestic passengers in a few months. Moreover, ground handling costs for airlines have reportedly increased.

On both these issues, concerns are valid. Flying out of the spanking new airport facility will cost more than it did at the old HAL airport, while reaching the airport itself takes more time. However, this is the trade-off for an airport that approaches world-class standards and has the ability to meet burgeoning airport traffic projections.