BIAL needs to soften their stand – no agreement is cast in stone

Both the Governments (of India and of Karnataka) face a dilemma — while they realise that there is sound logic, to keeping HAL airport open along with the new Bengaluru International Airport (BIA), they face a intransigent BIAL consortium, who appears hell bent on enforcing the terms of their Concession Agreement.

We should also try and understand BIAL’s perspective. They have done their part; so why should they re-negotiate their contract ?

Rajeev Chandrasekhar, Member of Parliament from Karnataka and President of FICCI, summed it up well in this news story in Business Standard. Commercial contracts and investments made in good faith in our state must not be put at risk. At the same time, it is the government’s obligation and responsibility to ensure public interest is best served. Bangalore International Airport Ltd (BIAL) and its shareholders must as well be reasonable towards a solution – that as long as their investments make reasonable returns, they shouldn’t push to maintain a monopoly

Thanks to the economic boom in India, the liberalisation of the aviation, and the efforts of the low cost carriers, who incidentally lead the global surge in aviation growth, Bangalore air traffic has exploded; to a growth level just not anticipated, let alone planned for.

In the 33 month period that BIA was being constructed, traffic has grown 255% from 4.1 million passengers per annum (MPPA) to almost 10.8 MPPA. With all due respect to the capabilities of the BIAL consortium, I dare say, there is no infrastructure project in the world, that can plan for, let alone handle this level of growth.

BIAL has independently contracted Lufthansa Consulting (LHC) on two occasions to project air traffic. I am sure these figures are the very foundation on which the consortium planned the financial viability of the project. As per BIAL website these are the passenger figures

Bangalore has crossed, BIAL’s “Optimistic” figures for the year 2010, 3 years ahead in 2007. This gap is only widening with each passing day. In November 2007, BIAL made projections to an committee of the International Air Transport Association (IATA) which show that the actual air traffic in 2013 will cross 23.44 MPPA, the “optimistic” number for 2025 i.e. 12 years ahead of schedule. Many seasoned industry watchers believe, that the BIAL projections to IATA, continue to be excessively conservative, and that with both BIAL and HAL operating together, Bangalore air traffic will cross the 23.44 MPPA mark by late 2012 itself.

Industry leaders have made a proposal to keep HAL airport open along with BIAL. Even with diversion of 4 MPPA to HAL, BIAL will handle 135% of its “optimisic” projections in 2010, growing to a whopping 210% by 2015. There is further benefit in this proposal to BIAL. We all know that the limiting factor at BIAL is not the terminal, and most definitely not capabilities, IT IS THE RUNWAY. Since AAI is a partner at BIA, the airport is abiding by AAI policy to boost regional traffic by not charging landing fees to ATR and similar turbo-prop aircraft. Any aircraft large or small, will occupy the same 2 minutes of time on the runway. By allowing HAL to function, BIA can divert this “less profitable” short-haul traffic to HAL and focus on the more profitable long haul and larger jet aircraft.

A commercial venture has to operate in harmony with the community it serves. The past episode of Enron, taught us, that a commercial agreement which impedes rather than promotes its original purpose of serving the public interest, will cause the opposition and resentment from the very public it was meant to serve. The promoters of BIAL should listen to the voices of reason echoing in chorus, and take this proposal positively to re-negotiate their Concession Agreement.

After all they will continue to get their bonanza of profits, but with the added bonus of public satisfaction and harmony.

About Devesh Agarwal

A electronics and automotive product management, marketing and branding expert, he was awarded a silver medal at the Lockheed Martin innovation competition 2010. He is ranked 6th on Mashable's list of aviation pros on Twitter and in addition to Bangalore Aviation, he has contributed to leading publications like Aviation Week, Conde Nast Traveller India, The Economic Times, and The Mint (a Wall Street Journal content partner). He remains a frequent flier and shares the good, the bad, and the ugly about the Indian aviation industry without fear or favour.

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