Bial will break even in 5 years if allowed to charge user fee

Venkatesha Babu

Bangalore: Seventeen years after it was conceived, the Bengaluru International Airport became operational on the night of 24-25 May after several delays. From the day of its launch, the airport has been in the news mainly for the wrong reasons, from complaints over poor connectivity to inadequate toilet facilities. This, however, doesn’t seem to faze Albert Brunner, the soft-spoken chief executive officer of airport operator Bangalore International Airport Ltd (Bial), who has been leading the project since 2002. In an interview with Mint, Brunner responds to the criticism and controversy surrounding Bial. Edited excerpts:

Can you give us an overview of where things stand today?

We opened on the 24th of May. Whereas the first flight was perfectly fine, the first day was a disaster. We had teething problems in two areas, operation-related and infrastructure-related.

People waited for 20 minutes for the staircase to attach to the aircraft. I would be fuming if it had happened to me. They had to wait for 40 minutes for baggage, another reason to get angry. Then you had to wait for one hour to get a taxi. The reason (was that) the service provider did not get the licence for taxis. When we opened we had 89 taxis, now we have 800 taxis.

You see, the cumulation of all these things gave us a bad name. I do not want to look for excuses, we have to solve it, but most of it was not under our control. Still, we were the one to take responsibility. Infrastructure-wise, we don’t have enough toilets, we had underestimated—the layouts were bad. We have now increased the number of toilets, added area wise 45%.

When people had to get out, we needed staircases and bridge or bags to be brought out, it was the responsiblity of the ground handler who is the service provider. Unfortunately, many of the airlines wanted to do the ground handling themselves. And for a long period, they had not signed the contract with the ground handlers. At a very late stage, they said to the ground handlers: “you do it”. But neither they had trained personnel nor equipment.

Why bad blood between you and Kingfisher Airlines?

Kingfisher has always said that they want to make Bangalore their operational base. And (Kingfisher owner Vijay) Mallya has requested for additional facilities. When they complained about the problems in the first two days, they complained in a very professional way, whatever they said was very justified. And we really solved it in a professional way. In view of this, I can’t understand the bad remarks from Mallya about us. Because he has the least reasons to speak like that. He asked for a lounge, we have given him that, he has a Kingfisher bar there. Whatever he requested, we have given him. He wanted space for office, we have given it. But they are yet to begin work on it. I personally do not understand why he made such remarks.

We have offered him whatever he wanted—office space, MRO (maintenance, repair and overhaul facility). The first time he came to the airport, he may have expected a much bigger airport, which is grand. But we have always said we do not want to build a status symbol, we want a functional airport; whenever the need arises, we can increase the size. Maybe he was disappointed…

Comparison with GMR Hyderabad International Airport Ltd, which built a bigger facility relatively more smoothly?

We wanted construction of the airport (to take off) in 2002. We could begin construction around mid-2005, the time we wanted to open the airport! During the same time we had unprecedented gowth in aviation, because we had a proactive civil aviation minister who opened the skies. They allowed new airlines.

Our promoters were disappointed with the slow progress… It would have been impossible for us to go to the board to tell them that we will be building a bigger airport and we need to redesign. Nobody would invest one additional rupee for that—they never knew whether we would succeed or not. I made a new traffic study and went to the board for additional money. We had two choices—either we stop and redesign, which will result in further delay or begin construction and during construction, try as much as possible to expand the airport without delaying the opening. We increased the scope of our contractors by 70% without delaying the opening date. We went from Rs1,412 crore to Rs1,930 crore and finally we had to increase (the cost) to Rs2,470 crore because of delays.

Hyderabad, which was two or three years behind us, were carefully watching. They even copied our concession agreement and it is not a joke.

It is said within a year Bial will get full in terms of handling capacity…

(Interrupts)… It makes me angry. Even the ministry speaks about annual capacity. There is nothing called annual capacity. Peak-hour capacity (is what matters). We don’t have peak hour for 24 hours.

If airlines want to operate, when the slots are full between 6 and 8, we ask them to come the next hour and we have space. You spread the peaks over the day, if you could do that over 24 hours, then our capacity would be 24 million.

What are the indications on the past one month in terms of traffic?

Presently, we get a feeling that there is a slowdown. It may be a seasonal slowdown, it is a slow season now. But we should see how it grows. Let us assume that we have an increase of 15%, then next year we may have around 11.5-12 million, this we can handle, another 10% we can handle, then it will be a bit tight.

But for two-three years down the line, infrastructure building has to start now. Right ?

We started our planning process around nine months ago. We know, we need the second runway by 2012-13, if we continue to grow as we grow now. We need a second terminal at the same time, four years from now. Next week we’ll go to the board and give the preliminary information and three months from now, we’ll give a concrete proposal.

Is the additional investment linked to valuation and divestment of stake as there has been talk of Bial being valued at $2.5 billion (Rs10,775 crore) or more?

Fact is that we do not have revenues from domestic passengers. User development fee (UDF) is the backbone of our revenue and 80% of traffic is domestic and we don’t have revenue (from domestic traffic) for the first three months. Therefore, there is a certain reluctance (on the part of our investors for additional investment).

None of them have, however, said I am not interested in infusing additional money. None of them have ever said we (have to) go public for funding. I give you my word it has never been discussed. It could be a solution because it is cheaper than borrowing from banks but (it is only one of the solutions being considered).

What is the investment for an intermediate terminal?

We are thinking whether we need to build a functional terminal or a slightly bigger shell that can accommodate more people. It is being considered. Building should be below Rs100 crore and the apron expansion should be more… that would mean an investment of another Rs200-300 crore at least.

There is apprehension that the project is goldplated and you have not opened the books completely.

We are completely transparent. There are two representatives of Karnataka and government of India and the books are open to them.

Feeling among investors?

Initially we projected break-even in seven-and-a-half years. However, since then we had to make more investment but we also have more passengers. If we could charge the UDF, we will break even in five years. As I told you before, we need to invest further. Really, it is the (capital) appreciation of the airport, not the revenue, that makes (this project) more interesting for the investor.

Airlines are bleeding. Your outlook? Seen any cancellation of short-haul flights ?

Airlines are our customers. They are in a tight position, GoAir and Paramount have suspended one flight each. We have no indication of a slowdown for the winter schedule. In September, we will get a clear indication.

Arguments in favour of keeping the short-haul flights from the old airport and indemnifying Bial for those losses. Comments.

I feel sorry that they still come up with those arguments. You can indemnify our loss but in the long run, it is the loss of the city. The city will lose out having a strong airport and an opportunity to attract lot of international airlines and make it stronger. Airlines are already losing money. They will also lose money by (spending on) additional resources in two airports.

K. Raghu contributed to this interview.

Source : The Mint

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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