Airport infrastructure in India has failed to keep abreast of rapid growth in the air transport sector. Could public-private partnerships be about to change that?
Two years ago IATA director-general Giovanni Bisignani warned publicly of "chaos" in India unless upgrade work on key airports started right away. For those in India's fast-growing air transport sector, it was a case of preaching to the choir, as India's infrastructure deficiencies are legendary. But since then, there have been enormous developments in terms of India's airports - although civil aviation minister Praful Patel wants it to be known that they are not because of any outside influences.
"We don't need anybody else to tell us whether infrastructure is in place or not," Patel said in an interview at his New Delhi office. "We do understand that the key to growth is infrastructure, and we would not like chaos to prevail. We are certainly very well seized on that and we are working towards that. There is no question we are addressing it, and it is visible."
Things are indeed starting to become visible and they will be far more so to air travellers relatively soon. Over the past two years there have been huge developments behind the scenes in the airport sector, which is badly needed with the country's stellar traffic growth. Indian air transport has risen at remarkable levels since 2003 as new airlines have launched and foreign carriers have been given additional rights to serve the country. In the last financial year, for example, domestic passenger numbers jumped 39.5% to 35 million and international passenger numbers increased 15% to 22.4 million, putting great strain on infrastructure.
The Civil Aviation Ministry forecasts that by the end of 2010 domestic passenger numbers will exceed 60 million and international passenger numbers 40 million. India's airlines have also been adding aircraft at an aggressive pace. There are currently a little more than 300 aircraft flying commercially in India with well over 400 aircraft on order with manufacturers. The ministry forecasts that there will be around 500-550 aircraft in service by the end of 2010. The key issue is where they will go, with airport infrastructure being woefully inadequate now.
Patel says the government is well aware of the infrastructure limitations, but there was no choice but to let the airline industry grow first. He says one reason infrastructure development is finally taking place is that the government decided to allow new airlines to be established so the intense pressure on airports would force improvement projects to get off the ground. Deciding to build first and then seeking funds and trying to get past the many bureaucratic hurdles later would no doubt have led to further stalling.
The gamble paid off. With many airports bursting at the seams it was impossible for political opponents and labour unions to argue against development and change, and many projects speeded up as a result.
The first move was to approve long-delayed projects for all-new "greenfield" airports at the IT centres of Bangalore and Hyderabad. Those two new airports are due to open early in 2008 and they have been built by the private sector, with involvement from both local and foreign companies.
After construction started on those airports, Patel personally pushed through privatisations of the country's two busiest airports, at Delhi and Mumbai, which between them handle nearly half of the country's air traffic. Many doubted the privatisations would go through but they did so remarkably smoothly, and upgrade projects were quick to be launched at both airports. All across the country many other airports are also either being upgraded already or will be upgraded.
K Ramalingam, regional executive director of Airports Authority of India, says that approaching $10 billion will be needed for the development of dozens of existing airports and the construction of all-new airports in the coming years. He says funds will be sought in part from private interests, which will have equity stakes, just as happened with the Bangalore, Delhi, Hyderabad and Mumbai airports: "We believe $9.3 million is needed...for the next five years."
Ramalingam says the government is now considering proposals from state governments for the development of new greenfield airports at or near Goa, Mumbai, Kannur, Karnataka and Pune, in addition to several others in the more remote north-east of the country. Chennai and Kolkata airports are also to be expanded and modernised and details are being finalised. Once this is accomplished, it will mean all six of India's main cities will either have all-new airports or their existing airports will have been improved.
In addition, another 35 "non-metro" airports have been earmarked for modernisation, largely to move the focus of air transport away from the busiest cities such as Delhi and Mumbai. "More and more traffic is focusing on [secondary] cities," says Ramalingam.
He adds that AAI expects overall Indian passenger traffic to grow by 15% annually over the next five years - domestic traffic alone will grow much more quickly - while cargo traffic is expected to grow by 20% a year over the same period. Aircraft movements increased 27% in India last year.
The incentive to change
In its effort to push the focus of air traffic away from Delhi, Mumbai and the four other metros and into other parts of the country, the government has offered incentives, such as waiving night landing and parking charges at some airports, and it has pushed for the establishment of regional airlines to serve less-developed parts of the country.
"The key in India is it is only Mumbai and Delhi that have huge constraints of infrastructure, not any other airport," says Patel. "We need to de-congest Mumbai and Delhi and not have all the traffic only coming in two places. Because of the pressure it is good that we are now seeing very high growth rates in all major cities across the country. Growth is in Mumbai and Delhi, but it is happening faster in other places too. That is the good thing, that is the silver lining, that while infrastructure constraints have only been talked about in context to Mumbai and Delhi, we say that life exists beyond Mumbai and Delhi in a large country like India."
He adds: "This is now genuinely taking place. Mumbai and Delhi's share of all traffic, both domestic and international, was close to 70% five years ago and this share is now under 50%. So it has yielded results."
That is not to say Mumbai and Delhi will be overlooked, however, as they will remain the busiest airports in the country for years to come. The Delhi-Mumbai air route, for example, is one of the world's busiest.
At the capital Delhi's Indira Gandhi International airport a massive investment programme is well under way. The airport was privatised last year, after which the new long-term lease-holders unveiled a multi-billion-dollar expansion that will see the construction of new runways and terminals, eventually increasing annual handling capacity to 100 million passengers.
In the last fiscal year to March the airport handled 20.4 million passengers, up from 16.1 million the previous year, and its new owners expect it will be the busiest airport in India by 2011, overtaking Mumbai. This fiscal year Delhi's airport is expected to handle 23.3 million passengers. Work on Terminal 3 is well under way and is to be ready in 2010, as is work on a new domestic terminal that will open in 2008, along with a third runway.
Later stages will see a fourth runway and more terminals being added in a "modular" manner, while the existing secondary runway will be realigned to make it parallel to the others. By 2015 throughput is expected to reach more than 46 million passengers a year and by 2025 this is forecast to rise to around 80 million. A six-lane approach road is also being built to the airport, and there will be a dedicated railway to and from the city centre.
In addition, studies are under way for an all-new airport not far from the capital city which looks set to be given the go-ahead in the coming months. The government is assessing a feasibility study that could lead to in-principle approval soon.
The state government of Uttar Pradesh has since 2001 been seeking approval to build a second airport to serve Delhi in an area called Noida, which is just over 70km (43.5 miles) from the capital. The project cost is estimated at Rp35 billion ($865 million) and if final approval is granted, as is widely expected, it will be built through joint-venture arrangements involving government agencies and private companies.
Second Mumbai airport
At Mumbai, meanwhile, upgrade works have also been taking place, although it does not have the room to expand in the same way as the existing Delhi airport. As a result, plans for a second international airport to serve India's main business centre are moving forward and should result in a consortium of private companies being selected in the next fiscal year to build and operate it. The government cleared proposals for a second Mumbai airport earlier this year. It will be majority owned by private groups, with AAI and the state government of Maharashtra having a combined 26%.
"We are targeting that [the new] Mumbai airport, the first phase, should be ready by 2011, so we are working backwards from that," says Patel. "We will complete the bidding process by 2008 and we hope by 2009/10/11, in three years at least, the basic facilities can start." This will deliver the ability to "decongest or move some of the high-density traffic away" from the existing airport, Patel adds.
The new Mumbai airport is to be built in an area known as Navi Mumbai, which also features a new town and manufacturing complex. It is intended to help ease the burden on the existing airport, which is expected to reach its design capacity in 2013 but which will remain open once the new airport is completed. Plans call for an airport with an initial capacity of 10 million passengers a year, rising to 20 million in a second-phase expansion and ultimately to 40 million. It will be built and owned in public-private partnership, which is seen as the model for much of India's airport development.
"Unlike China, here in India 60% of the traffic handled by airports will be handled by the private sector by next year," says Kiran Kumar Grandhi, chairman of the airports business unit of infrastructure firm GMR Group. GMR leads a consortium that runs Delhi airport and another which is building the new Hyderabad airport. "Today it is about 50%, with Delhi, Mumbai and Cochin - they constitute about 45-50% of India's total traffic. But by the time both Bangalore and Hyderabad commission, 60% of the traffic is going to be handled by the private airports. That is a pretty significant development in the last couple of years."
Things are still far from ideal, and travelling through India's airports is still generally an unpleasant experience. But at least change is taking place and India's government recognises what needs to be done. "You can't go back," says Grandhi. "The expectations are much higher now, and new benchmarks are being set."
Hyderabad set for all-new airport
At the south-central Indian city of Hyderabad, construction is nearly complete on an all-new "greenfield" airport that will set new standards for air transport infrastructure in the country. It is set to open in mid-March, but when Airline Business visited recently, construction work was on schedule for full completion by the end of November.
The all-new airport is being built to replace the IT centre of Hyderabad's existing airport, which is at capacity and cannot be expanded. It is due to open around the same time as another all-new airport will open in Bangalore.
State-owned Airports Authority of India operates the existing Hyderabad airport, but the new facility has been built through a government-private sector partnership. It is a new model for India, but one that is set to be the norm in future for new airport projects. Indian energy and infrastructure group GMR has 63% of the joint venture behind the new airport. Malaysia Airports Holdings holds 11%, while AAI and the government of the Indian state of Andhra Pradesh have 13% each.
Construction began in March 2005 and initial plans called for it to have a design capacity of 5 million passengers. This was later increased to 7 million and again to 12 million as domestic traffic grew at rates well above expectations. Chairman of GMR's airports business unit, Kiran Kumar Grandhi, says second-phase expansion will begin before passenger throughput reaches 12 million, which is expected around 2011 or 2012, increasing capacity to 20 million passengers annually. Further expansion will include the construction of a second runway and passenger terminal, giving the airport an annual handling capacity of 40 million or more passengers.
Grandhi says the ultimate intention is to make the new airport a transit hub for both passengers and cargo. It is being built at a project cost of nearly Rp25 billion ($630 million). The existing airport, which will close in 2008, handled just under six million passengers in the year to March 2007, having risen from just under one million in 2001.