Interview of Mr. Albert Brunner, CEO, BIAL on India Infoline

Mr Albert Brunner, CEO, Bangalore International Airport Project
Jul 08, 2008

Bangalore International Airport Limited (BIAL), the owner and operator of the new Bengaluru International Airport, is a public limited company, registered under the Indian Companies Act. A private-public venture, the project realized so far and the upcoming phases are being built and will be operated by the company for the next 30 years with an option to continue for another 30 years. BIAL is committed to establishing the new Bengaluru International Airport as India’s leading airport in terms of quality and efficiency and set a benchmark for the future commercial development of Indian airports. The new airport is located about 35 kilometers north of the city. This will allow both the city as well as the airport to develop. It is spread over an area of approximately 4000 acres and besides the regular airport services it will offer a hotel, shopping mall, food courts and other convenience amenities in the upcoming project phases.

Albert Brunner, Chief Executive Officer (CEO), Bangalore International Airport Project, is a Civil Engineer by profession and is from Zurich, Switzerland. He has also had postgraduate trainings in business administration. Albert Brunner was appointed as CEO of Bangalore International Airport Limited in 2002. Under his leadership, the Company reached Financial Closure in June 2005 and the construction of the airport began in July 2005. Mr. Albert Brunner has been in the airport business for the last 17 years and has served as a member of the Executive Board of Zurich Airport Authority from 1995.

Replying to Anil Mascarenhas of India Infoline, Albert Brunner, CEO, Bangalore International Airport Project, says, “Operation-wise, we have reached a high level of performance.”

It’s been a month since you started operations. What are some of the recent developments?
The airport is just about a month old or should we say young and encouraging announcements such as the launch of the Deccan Aviation Skylimo (helicopter service to and from the city) on July 01 are taking shape. It is the first of its kind in India.

Four new international airlines have started operations from Bengaluru International Airport since it began operations, due to increased capacity. They are Air Mauritius that began operations on May 27, Tiger Airways on June 01, Oman Air on June 16 and Dragon Air (Subsidiary of Cathay Pacific) on July 02.

Where connectivity is concerned, some of the aspects that have delighted airport users at Bengaluru International Airport include the promptness and efficiency of BMTC Volvo bus services and so far connectivity has not been a block for most passengers. We do realize that the connectivity for the companies situated in the south is still an issue and will work together with the Government of Karnataka to improve the same.

Operation-wise, we have reached a high level of performance. Most of the flights leave on time as long as they arrive on time. This is confirmed by all international airlines and most of the domestic ones as well.

The airport’s design and planning have a lot in store for future expansion. Could you give us an idea about the same?
The Master Plan of the Bengaluru International Airport has been developed to fulfill the need for an operationally efficient and passenger friendly airport for Bangalore. It ensures that the size and capacity of the airport facilities can be gradually expanded based on the passenger and cargo growth.

The Master Plan not only includes provision of premium land for commercial real estate developments such as office parks, retail, entertainment and hospitality but also land reserve for a rail link to the city. The intention of BIAL to develop an Airport City is in line with the increasing attention being paid to ‘Aerotropolises’ globally.

Please elaborate on Aerotropolises.
An Aerotropolis is a city in which the layout, infrastructure and economy are centered around a major airport. Experts in the field are of the opinion that Airports will shape business location and urban development in this century as much as seaports did in the 18th century, railroads did in the 19th century and highways in the 20th century.

We envision the airport city to be a flourishing destination in itself; people will not only come here to take flights but also to relax, do business and shop. It will provide growth giving a strong impact on economy and creation of jobs.

What is the annual passenger-handling capacity? What are your expansion plans?
Infrastructure at an airport is not designed to an annual capacity, but to a peak hour demand. Under the present traffic scenario, Bengaluru International Airport can easily handle the traffic for the next 2-3 years. During this time, we want to realize the next expansion.

The Master Plan of Bengaluru International Airport has been developed to fulfill the need for an operationally efficient and passenger friendly airport for Bangalore. It ensures that the size and capacity of the airport facilities can be gradually expanded based on the passenger and cargo growth. The land at our disposal allows us to develop the airport up to a capacity of approximately 40 million passengers a year.

We are working towards the next expansion phase of the new airport. However, kindly note that we are currently at a planning stage. The work on expansion is in line with our commitment to expand the size and capacity of the airport infrastructure in line with the projected passenger and cargo growth. We will keep you informed as soon as we have some concrete plans to announce.

Given the sharp spike in ATF, have you witnessed a drop in passengers? Many flights, which otherwise used to be full are seeing vacant seats, especially in the business classes. What is your take on the situation?
As of last week, the total number of flights was 1120 (per week). This figure includes both international and domestic flights. In comparison to the first week of operations, there is a 2% reduction in the total number of flights. This is due to a 3% reduction in domestic flights* per week. International flights however have shown a 4% increase (from 134 flights to 140 flights) per week. *Due to operational reasons, Go Airways has suspended operations till Sept 15, 2008 and Paramount Airways has reduced frequency.

Walk us through the revenue streams from the airport. Landing and parking charges may be a large part of the income?
The revenue from the airport is divided into aeronautical and non-aeronautical revenues. Since the airport is only a month old, it is a bit early to comment on the aeronautical and non-aeronautical revenue split. However, approximately 15% of revenues are expected to come from the non-aeronautical avenues.

Aeronautical revenue: A very important revenue stream for the airport is the User Development Fee (UDF). The Concession Agreement specifies that BIAL will be allowed to levy UDF from embarking domestic and international passengers for the provision of passenger amenities, services and facilities. The UDF is used for the development, management, maintenance and operation of the airport. While international passengers flying out of Bengaluru International Airport pay UDF, domestic passengers are not being charged this fee for the first three months of airport operations.

Landing charges at BIAL to be paid by airlines as per the current AAI charges levied at other international airports in India. Landing charges at BIAL are in fact lower than what was charged by HAL for all carriers. According to the concession agreement, BIAL could adjust the landing charges to the inflation rate since 2001, this will lead to an increase of 38% but BIAL has totally waived of any such increase.

Tell us about your cargo facility. What is the utilization now?
In line with international standards, BIAL selected the consortiums of Air India & SATS and Menzies Aviation with Bobba Group to handle cargo at the new airport. With an allocated area of fifteen acres and an initial capacity to handle approximately 350,000 tons of cargo annually, space constraints will no longer exist at the new airport.

Following are some of the salient features:

  • The cargo facility has domestic and international cargo in the same premises.
  • The concessionaires have designed the cargo facility which is under Full CCTV Surveillance all areas 24/7.
  • The concessionaires offer cargo facility to airlines and shippers at the best international standards and competitive prices
  • The warehouse management is backed up with tried and tested IT systems which has features like RF wireless Hand-held Mobile Terminals, Barcode System Management, Management on Cargo, Storage Locations, ULDs, Doors etc, Inventory Check, Breakdown Management, Build-up Management, Dangerous Goods Management, Damaged ULD Management, Damaged Cargo Management, ULD Inventory Management, truck Queue Control
  • The cargo concessionaire provide facilities like pallet storage systems, separate storage space for small and loose cargo, track and trace inside their facility.
  • Out of many, the cargo warehouses have the following facilities for the users: Banks, conference rooms, training rooms, business centre, help desk, staff canteen, truck parking.

The new cargo facility handles all types of cargo – general cargo, perishable cargo, courier, mail and specialized cargo (dangerous goods, live stock, etc). Adequate holding areas and cold storages have been provided for by both consortia, catering not only to floriculture and horticulture but also industries like pharmaceuticals and other perishables. Cargo Village: The new airport will provide infrastructure for cargo agents and freight forwarders at a cargo village that is being built in the airport premises. This area will house 200 offices and 120 warehouses.

By when do you expect to start expansion here?
BIAL forecasts cargo volumes of approximately 220,000 tons in the first year of operation as opposed to a capacity of 350,000 tons. Both the cargo terminals at the new airport can be expanded when the need arises.

Furthermore, BIAL has the land reserve to allow more cargo handles to operate at the new airport in order to boost the import/export cargo volume. The new airport will see both a quantitative increase in terms of export facility area and qualitative improvement, in terms of storage and handling capabilities, to promote the outflow of goods globally.

The new airport will see both a quantitative increase in terms of export facility area and qualitative improvement, in terms of storage and handling capabilities, to promote the outflow of goods globally which mainly consist of garments, pharmaceuticals, machinery spares and perishables.

What revenues do you expect from commercial activities? We hear your advertising concessionaire JC Decaux has already sold out 70 per cent of its advertising space.
Yes, BIAL has chosen JC Decaux as the airport’s advertising concessionaire for a period of seven years. A world leader in outdoor media, JC Decaux builds and manages all media space throughout the airport. The company brings in a wide range of international expertise and experience, thereby positioning the airport as an exclusive property offering state of the art media options.

At Bengaluru International Airport, we have aimed to create world-class advertising opportunities which are on par with other international airports. Due to the superior opportunity at our airport we have received a very encouraging response from the market. We, currently, have foreign as well as local brands present at the airport. It is our constant endeavor to create unique and innovative advertising solutions at the airport.

Could you give us an idea about the revenues you see from here and for how long are the rates negotiated typically?
We have a rate card for promotions and JCDecaux will be better positioned to give you the relevant details.

What kind of incentives or government help would you seek?
Building an Airport within the PPP model has its set of challenges given the magnitude of the project. Our main challenge was to deliver this project on time. All other aspects have been of learning for us and we could not have done this without the tremendous support received by the government authorities as well as the Private Promoters. At this point, the focus needs to remain on further developing the connectivity form the city to the airport.

What is the customer feedback so far?
It’s been almost one month, since BIA started its commercial operations and we have received overwhelming responses from travelers to and from the Airport. Passenger feedback has been key to improving the airport facilities. While many have congratulated BIAL on the first class facilities and access road to the airport, many passengers have also given objective feedback on the service and amenities.

Most passengers have been empathetic to the fact that a project of this magnitude has initial interruptions and have expressed their support. All the feedback received has been compiled systematically and action has been initiated for each of them.

Brief us on the latest ownership pattern of the airport. Any stake sale etc in the near future? Reports mentioned about BIAL seeking a valuation of up to $2.5 billion to raise about $200 million in equity to fund the second phase of the airport’s development. Could you give us more details.
Bangalore International Airport Limited (BIAL) is Public limited company under Indian Companies Act formed to design, build, own and operate the greenfield private sectorowned and operated airport in India. Private promoters hold a 74% stake in BIAL while the state holds the remaining 26%.

The shareholding is as follows:
Karnataka State Investment & Industrial Development Corporation – 13%, Airport Authority of India – 13%. Siemens Projects Ventures – 40%, Larsen and Toubro – 17% and Unique Zurich Airport – 17%.

Of the total cost of Rs24.70bn, 16% is equity investment, 14% is state support from GOK, 65% is debt and the remaining 5% is internal accruals or security deposits.
It is important to understand here that the state had set aside a certain amount for this project. Hence, the equity contribution by the private players had to accordingly be in the shareholding ratio, keeping the state investment amount in mind.

Regarding reports mentioned about BIAL seeking a valuation of up to $2.5 billion to raise about $200 million in equity to fund the second phase of the airport’s development, I would like to reiterate that this is not true. There have not been any talks in this regard between the shareholders.

The Karnataka chief minister spoke about negotiating with BIAL to keep HAL airport open. What is your view?
As you are aware, HAL was shut the day BIAL was operational, ie on Friday, May 24, 2008. We have always maintained that Bangalore needs a single aviation platform for both domestic and international traffic, to allow seamless transfer between domestic and international flights for passengers, cargo and efficient airline operations. All successful aviation hubs in Asia (Singapore, Kuala Lumpur, Hong Kong, Seoul) have developed out of such a single platform. Examples cited where a city has several airports (New York, London) have above 100 Mio. passengers, compared to the 10 mio of Bangalore. Since Bangalore has a strong business market and ideal location, the new airport will serve as a regional hub for South India attracting investments and businesses that will lead to significant growth and job creation. In the current scenario, Bangalore stands the chance to become a hub for south India as against Hyderabad and Chennai.

Last but not least it has to be mentioned that the concession agreement, which clearly stipulates the closure of the then-existing airport, has always anticipated a growth of the new airport. The concession agreement even indicates future expansion steps. Therefore it was always clear: When the new airport opens, the old will be closed. Thereafter the new airport has to be expanded in order to always meet the demand.

What is your expectation regarding the high-speed rail link between the city and the Bengaluru International Airport (BIA) at Devanahally. By when do you see it happening?
From a passenger and environment point of view a rail link to the airport is absolutely essential and BIAL has always maintained that. The high-speed rail link would enhance the convenience and comfort of the traveler. For exact timelines of the project, the state authorities would be better positioned to answer you.

Give us details about the low cost terminal. What kind of activity and business do you expect?
There has been a lot of speculation on this topic. While we are working on the next expansion of the airport, kindly note that nothing has been finalized yet. The work on expansion is in line with our commitment to expand the size and capacity of the airport infrastructure in line with the projected passenger and cargo growth. We will keep you informed as soon as we have some concrete plans to announce.

What is the total cost so far incurred. In the next two to three years, what is the amount set aside for the airport. How would it be funded?
The project cost of phase I currently stands at Rs24.70bn. This cost does not include the added investment of approx. Rs10bn made by the selected concessionaires. Phase II of the airport expansion which will include another runway and terminal building is expected to cost more than phase I. An intermediate expansion of the existing terminal building will cost approximately $20mn.

Source : India Infoline

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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