Airport zone Facilities: Big opportunity for developers http://www.thehindubusinessline.com/2008/09/08/stories/2008090850760600.htm <Internationally, airports offer more than core aviation services. They are centres of hospitality, retail spaces, and even sometimes function as alternative central business districts for the cities they are located in....issues such as lack of land availability, inadequate connectivity to airports, and other related issues are proving to be bottlenecks in the growth plans....As far as the core aviation functions are concerned, like India, even in other global markets, they are largely treated as aspects of public utility in terms of operations as well as economics and are, therefore, closely regulated....airport operators in the global market, however, have several avenues to earn higher returns by developing airport-enabled activities such as free trade zones and knowledge parks in the extended airport city .... components such as fuel costs, regulatory uncertainty regarding airport projects, and passenger growth remain some of the short- to medium-term concerns. In addition, since these projects are capital-intensive, the tight monetary regime raises financing concerns as well, ...domestic and international air traffic expanded at a compounded annual growth rate (CAGR) of 22 per cent and 14 per cent, respectively over 2002-07, driven by growth of low-cost carriers and the emergence of India as a business and tourist destination."These figures outstrip government forecasts of a CAGR of 6-7 per cent over the same period and have shown up the inadequacies of India's aviation infrastructure," said the report. It adds that airport developers are likely to see their projects achieve higher-than anticipated capacity utilisation in the early years of development. However, as airlines are forced to cut capacity on certain short-haul routes because of high oil prices, it could lead to lower traffic growth in the short term.On the regulatory side, returns from airport projects also depend on relevant operating agreements .. Since the viability of the airport business model depends on continued growth in air and cargo traffic, any negative change in the two are likely to impact the airport operators. Though traffic figures have been on a growth trajectory for a while, there have been short- to medium-term blips in the past, which reduce air traffic and cause losses for airport operators. In India, the report suggests, developers have had only positive surprises with respect to traffic growth. The privatisation process commenced in 2005, and returns for early investors have exceeded projections. However, "this may not be the case for newer airport privatisation projects, where traffic growth expectations will be much higher from all bidders." ...airport development projects involve high capital expenditure. Edelweiss, in its analysis of the problems that airport operators in India could face in terms of capex, says each airport project is unique and there are no benchmarks of capital cost for different projects. In the high current inflation scenario, the possibility of cost overruns in these projects is high. "The modernisation projects of the Mumbai and Delhi airports have already undergone upward revision in capex by as much as 50 per cent on account of material cost escalation and expansion in scope of projects. This risk is partly mitigated by government-mandated returns in the aviation charges. ..given the high capex involved, the projects are typically funded on a debt-to-equity ratio of between 1:1 and 3:1. The high debt component in projects entails a high rate of risk in the rising interest rate scenario. Airport projects have been trying to mitigate the costs by taking foreign currency loans at more competitive rates. As international airports typically have foreign currency receivables, they provide a natural foreign currency hedge against loan repayments.>
Comments: This otherwise sensible take has to be revamped for purposes of a project like Mopa. The vision of "airport zones" has to be held back for the long term (10-20 years down the line) instead of from Day One as far as Mopa is concerned. Similarly any idea of Mopa as an "international airport". To begin with the focus has to be on aeronautic activity even while "provision" is made for long term growth and expansion. The traffic projections may have to be down graded from the recent explosive levels to traditional ones. This becomes accentuated by the need to keep Dabolim open on a sustained basis. Higher growth can be achieved by enabling low cost carriers to operate on new short haul routes. This requires keeping airport costs and charges low. The successful privatisations so far may be Delhi and Mumbai which have seen an explosion in traffic sustained somewhat by a regression to hub-to-hub traffic in the recent slump. The newer projects like Hyderabad and Bangalore may be struggling due to the collapse in short haul traffic in 2008. These are the kinds of things Goa government must get up to speed on before declaring open season for airport developers. That said, it makes no sense for Goans to have a government that (1) collects taxes but doesnt deliver on basic services (robbery?) and simultaneously (2) intends to give airport developers the licence to rip off passengers and residents in their desparate bid to keep their project viable. Meantime Dabolim civil enclave is left completely in the lurch. This is no way to run a promising state like Goa. What is infinitely worse is that people who should know better are subscribing to this totally retrograde view! What balderdash.
