Bigger version of airport on cards

Bigger version of airport on cards
Projected Passenger Growth Prompts BIAL To Look At Scale-Up

The Economic Times

BANGALORE International Airport (BIAL), which grabbed the headlines after the abrupt exit of Infosys mentor N R Narayanamurthy, is planning to approach its shareholders including the state and central government shortly, to make a bigger airport than planned before to meet the surge in air travel.

While the earlier projection looked at developing an airport to deal with a passenger base of 4-5 million in 2008, the new estimate is considering a traffic of 6.7-7 million in 2008, 8.5 million in 2010 and 11.4 million in 2015, making it imperative to expand the facility.

The Bangalore air travel market has been on fire in the last year or two and is expected to sustain the current pace of growth subject to the right economic conditions and availability of infrastructure. For instance, the value of international air ticketing from Bangalore is estimated at Rs 1,000 crore plus this year.

Sources said while in the past Mr Murthy was championing the cause of the airport, especially at the Centre, the existing BIAL team will have to convince the government of the importance of creating a larger airport. The state and the centre hold 13% each in the airport company. They may agree to expansion of the facility and the additional investment on the condition that their equity position remains unaffected without warranting any extra cost exposure. It would mean a change in the debt equity ratio and possible relook at the timeframe of return on equity.

The business plans with the concessionaires — fuel, catering, cargo, hotel etc — will also have to be revisited in keeping with the larger passenger size.

The project is presently estimated to cost just over Rs 1,400 crore and is scheduled for completion and commercial operation by March 2008. In order to meet a higher traffic output, the airport’s expansion will have to be planned immediately so that it can be synchronised into the existing plans and building designs. If the exercise is kicked off at a later date, the cost escalation could be huge. A few hundred crore of additional investment may be called for to meet the new goals, analysts say.

Even in the case of some international airports, the second or third rounds of expansion have involved large investments, which sectoral analysts say, could have been minimised if the airport had anticipated growth earlier and developed a bigger facility.

An infrastructure facility such as an airport, which calls for large investments, has to be developed with a future demand perspective (10-15 years).