Overview of Indian

International

airline & Airport

Sector

Prepared by

Centre for Asia Pacific

Aviation (India) Pty. Ltd.

for

Tax Free World Association

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Table of Contents  INTRODUCTION .............................................................................................................. 3 TRENDS IN INTERNATIONAL PASSENGER MOVEMENTS .................................... 3 

Traffic Growth & Drivers ................................................................................................ 4 Economic ...................................................................................................................... 4 International Policy Settings ........................................................................................ 5 Airline Industry Policy Settings ................................................................................... 5 Low Cost Carriers ........................................................................................................ 6 Tourism Marketing ....................................................................................................... 6 

Indian v Foreign Travellers ............................................................................................. 7 Direct Transit Traffic ....................................................................................................... 8 Distribution of Traffic ..................................................................................................... 8 Organised Retail ............................................................................................................ 10 Domestic Retail ............................................................................................................. 10 

AIRPORT MODERNISATION PROGRAM .................................................................. 10 Profiles of the Major Gateways ..................................................................................... 12 

New Delhi .................................................................................................................. 12 Mumbai ...................................................................................................................... 14 Bangalore ................................................................................................................... 15 Hyderabad .................................................................................................................. 16 Chennai ....................................................................................................................... 17 Kolkata ....................................................................................................................... 17 

Modernisation of 35 Non-Metro Airports ..................................................................... 18 Planned Greenfield Airport Development ..................................................................... 20 Low Cost Airports & Terminals .................................................................................... 21 

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INTRODUCTION This report was prepared to supplement the recent familiarisation tour which TFWA and CAPA completed together, covering airports in Delhi, Mumbai, Cochin, Bangalore, Hyderabad, Chennai and Kolkata. The key areas of interest for airport retailers can broadly be divided into:

1) trends in international passenger movements, to understand the direction and potential of the overall market, and: 2) developments at the level of the airports themselves, to understand the physical environment and opportunities for retail activities.

This report is accordingly divided into two sections reflecting the above.

TRENDS IN INTERNATIONAL PASSENGER MOVEMENTS In the last 5 years, Indian aviation and tourism have witnessed dramatic changes across the entire spectrum of the industry. International and domestic traffic have both grown at unprecedented rates, new airlines have entered the market, billion of dollars are being invested in airports and the country’s hotels are full. From an airport retail perspective, some of the key trends and characteristics are:

International traffic handled at Indian airports has been growing at approximately 15% per annum for the last 5 years.

A more liberal regulatory environment is likely to see international traffic continue to grow at sustained double digit levels over the medium term.

Within the international passenger category at India’s airports, Indian passengers

outnumber foreign passengers by 2:1. This ratio may increase slightly over the next few years as the outbound growth rate is likely to slightly exceed inbound.

Traffic is becoming more widely distributed across India’s airports, with a reduction

in concentration at Delhi and Mumbai. This will generate new retail opportunities at airports which previously had limited or no facilities.

The Indian travel market is extremely diverse, from expatriate labourers travelling to

the Gulf, to wealthy and sophisticated global travellers from the major metros. The

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mix of travellers varies significantly by airport and detailed market segmentation studies will be necessary for brands to understand potential demand in each city.

Organised general retail is expanding rapidly across India, which in turn is expected

to influence trends in airport retail.

Traffic Growth & Drivers Until 2003-04, international traffic at Indian airports had recorded uninspiring growth rates during the previous decade. However, since then the sector has expanded at an average of 15% per annum, resulting in a doubling of traffic in just 5 years. International Passenger Movements at Indian Airports (1996/97 – 2007/08)

Source: Airports Authority of India – data is based on 12 months to 31 March N.B. the figure for 2007/08 is a full year estimate based on 10 months actual data Some of the key drivers of both recent and expected future growth include: Economic

India’s GDP growth has averaged 8% per annum for the last 5 years, resulting in increased disposable incomes and consumption of leisure/travel products.

International trade and foreign direct investment have been growing at rates even faster than GDP, which combined with record corporate profitability has resulted in strong business travel flows, both international and domestic.

‐

5,000,000 

10,000,000 

15,000,000 

20,000,000 

25,000,000 

30,000,000 

35,000,000 

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International Policy Settings The Government of India has pursued an increasingly liberal approach to bilateral

air services agreements, recognising that the benefits for trade and tourism are significant. It has therefore granted increased access to carriers from key markets such as the UK, Canada, Germany, UAE, Singapore, Hong Kong and China. Most notably, an Open Skies Agreement was signed with the United States in 2005.

Overall bilateral seat entitlements increased 123% between 2003 and 2006. The impact of this can be seen most markedly on the UK-India market where the number of weekly non-stop frequencies has increased from 34 in 2006 to 112 today.

Airline Industry Policy Settings Air India, the national flag carrier, had suffered from years of neglect and under-

investment. The carrier’s fleet was virtually stagnant for a decade from 1995. However, in 2006 the government placed an order for 68 Boeing aircraft for international operations, including ultra-longhaul equipment capable of operating non-stop to the US. The first of these aircraft were deployed from August 2007.

Private domestic carriers, which were previously prohibited from operating international services, were granted overseas access on a phased basis. In 2004, they were permitted to operate to neighbouring countries in South Asia, and then a year later to the rest of the world (excluding the lucrative Gulf routes). However, in January 2008, the Gulf was also opened up to private carriers. However, two restrictions remain: carriers must have been operating for 5 years on domestic routes, and must have a fleet of at least 20 aircraft.

At present, Jet Airways and its value based subsidiary, JetLite, are the only private airlines which qualify for international operations. The Group has already built up an extensive network covering Europe, North America, the Gulf, Nepal, Sri Lanka and Southeast Asia, with imminent new destinations including Hong Kong, China, the UAE and Pakistan.

Kingfisher Airlines, a full service domestic carrier launched services in May 2005. Under existing regulations it would have to wait until 2010 to operate overseas. However, within 1 month of its launch it signalled its intention to fly international with an order for widebody aircraft, including A380s. It is currently in the process of merging with low cost carrier, Air Deccan, which will result in Kingfisher inheriting Air Deccan’s international qualification date of August 2008. The carrier has over 30 widebody aircraft on order.

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As at February 2008, Indian carriers had 100 widebody aircraft on order for delivery over the next 5 years. In addition, a number of narrowbodies may be used for shorthaul international services to the Gulf and South/Southeast Asia. With the losses currently being incurred on domestic routes due to poor yields and high costs, Air India , Jet Airways and Kingfisher Airlines may look to redeploy some shorthaul aircraft from domestic to international services.

Low Cost Carriers The low cost carrier model, which has had such a dramatic impact on domestic

travel in India, is also making inroads on the international front. Several foreign LCCs are now operating into India eg. Air Arabia, Jazeera Airways and Tiger Airways. Air Arabia in particular has expanded rapidly and operates from 11 Indian cities, the most by any foreign carrier, with passengers on Indian routes accounting for 20% of its total.

Meanwhile, Air India Express, the low cost subsidiary of Air India, has grown its fleet to 17 B737-800s, operating to the Gulf, Southeast Asia and a handful of domestic routes. JetLite, the value-based subsidiary of Jet Airways operates to Nepal and Sri Lanka and is planning to launch services shortly to the Gulf and Pakistan. While Kingfisher is also expected to operate a lower cost subsidiary on international routes, although its network plans are yet to be announced.

It will be important for airport retailers to segment their customer base as there are likely to be significant differences between various demographics. Although it was earlier frequently assumed that LCC passengers would not be important customers for airport retailers, this is not necessarily the case. In fact there is increasing research to suggest that LCC passengers can be very high spenders, however achieving the appropriate product offering is important.

Tourism Marketing The Ministry of Tourism has increased expenditure on international promotion,

including an award winning advertising campaign that has succeeded in improving the destination’s brand profile overseas.

This has been complemented by growing recognition of the quality of India’s ground product, particularly its luxury hotels and palaces which have recently won numerous accolades, and increased global awareness.

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Indian v Foreign Travellers The relative proportion of Indian travellers to foreigners was estimated as follows:

Total international passenger movements were obtained from the Airports Authority of India;

All travellers, both inbound and outbound were assumed to travel on a return basis, representing two passenger movements;

Inbound travel statistics were sourced from the Ministry of Tourism and doubled to arrive at passenger movements accounted for by visitors;

Foreign passenger movements were deducted from the AAI total and the balance was assumed to represent Indian outbound passenger movements;

On this basis, an estimation of the relative proportion of international passenger movements at Indian airports is as follows:

Year Indian Residents

Foreign Visitors

2002/03 65.7% 34.3%

2003/04 63.2% 36.8%

2004/05 63.6% 36.4%

2005/06 64.1% 35.9%

2006/07 65.6% 34.4%

The slight increase in proportion of Indian residents since 2003/04 reflects the fact that outbound departures have been growing at approximately 1-2 percentage points faster than inbound. This may be expected to continue, at least for the next 2-3 years for the following reasons:

Inbound travel is encountering supply side constraints in peak season due to a shortage of hotel rooms, which is acting as a cap on inbound growth. Tour operators are reporting having to turn away significant business because of this issue.

The shortage of rooms has resulted in very high hotel tariffs, which has reduced India’s competitiveness as a destination. A number of new hotels are in development, but it will take 2-3 years before capacity catches up with demand.

North America and Europe, which account for approximately 50% of foreign visitors to India, are expected to experience an economic slowdown in the short-term, however India is projected to continue GDP growth of 7-8%, which should keep outbound more buoyant than inbound.

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Direct Transit Traffic

Indian airports currently have minimal international transit traffic. This is due to the fact that the country has neither the airline infrastructure, nor the airport infrastructure to act as an international hub. Until recently, Air India was the only Indian carrier permitted to operate international services. Its limited network, tired inflight product, and the prospect of a lengthy transit at a dilapidated Mumbai Airport, did not allow it to compete for sixth freedom traffic. However, this situation may change. Air India is finally upgrading and expanding its fleet. It has now been joined by Jet Airways as a second Indian international carrier, with Kingfisher to be granted permission later in 2008. Jet Airways and Kingfisher Airlines have both established an excellent reputation for excellence in their in-flight product and service. Kingfisher Airlines is for example one of only six carriers globally to have received a 5 Star rating on the Skytrax survey. Beyond 2010, once India’s airport infrastructure improves, providing an enhanced passenger experience on the ground and increased operational flexibility for airlines, the country could have a number of world class airlines and airports. At that stage it is quite possible that for a passenger flying from Sydney to London for example, a routing via Mumbai on Jet Airways could be as attractive an option as travelling on Singapore Airlines or Emirates.

Distribution of Traffic In line with its policy of providing more liberal access for international services, the government has been particularly open in the case of non-metro airports. This has been partly due to the fact that the key metro airports are capacity constrained, but also to support connectivity and economic development outside the key hubs. In fact, India has offered unlimited access, on a reciprocal basis, to 18 non-metro cities for airlines from ASEAN and SAARC countries. The result of this more open access has been a reduction in concentration of services at Delhi and Mumbai, with rapid growth at the other metros such as Bangalore, Chennai and Hyderabad, but also at an increasing number of cities which previously did not have international services eg. Varanasi, Nagpur, Jaipur, Mangalore etc.

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Proportion of International Traffic Handled at Various Airports

Delhi /Mumbai Bangalore / Chennai Hyderabad / Kolkata

Non-Metro Airports

2003/04 58.2% 22.6% 19.3%

2007/08 51.3% 25.1% 23.6%

Several carriers have taken advantage of this liberalisation to offer an extensive network of cities, with Air Arabia operating to 11 cities, and Emirates and the Singapore Airlines Group both operating to 10 destinations. A non-metro city, such as Ahmedabad, is now served for example by Air India, Air Arabia, Emirates, Qatar Airways, Kuwait Airways and Singapore Airlines. Indian Destinations served by a sample of Foreign Carriers

Air Arabia

Air India Express

British Airways

Emirates Etihad Lufthansa Qatar Airways

SriLankan Airlines

Ahmedabad Amritsar Bangalore Chennai * Coimbatore Delhi Goa Hyderabad * Jaipur * Kochi Kolkata * Kozhikode * Lucknow Mangalore Mumbai Nagpur Trichy Trivandrum

Source: Airline websites / * denotes route to launch in 2008

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Organised Retail Indian international travellers have been recognised by overseas destinations as having a relatively high spend per capita, with shopping regularly featuring as one of the leading activities on vacation. This has in large part been driven by traditionally limited retail options in India itself. Organised retail accounts for only 2-3% of the total market. That landscape is changing rapidly, with literally hundreds of malls under construction across the country. The 2007 AT Kearney Global Retail Index rates India as the leading global market for retail investment opportunities, and projects growth of 40% per annum for organised retail through to 2010. The opportunity to shop in India may change the consumption profile for Indian travellers as certain goods which they used to buy overseas or duty free may now be available more conveniently at the local mall. However, the growth of organised retail is also likely to increase the profile and awareness of luxury brands. This trend can be seen with the imminent opening of two malls dedicated to high end brands – the Emporio Mall in New Delhi and the UB Mall in Bangalore. This increased familiarity may in turn increase demand for these products to be available at duty free locations at Indian airports.

Domestic Retail In addition to tax free products, another major growth sector is expected to be general retail at domestic airports. This is also a relatively new concept in India, options were previously limited to books and snacks. Well-presented and designed retail environments with a wide range of products could tap into an increasingly consumerist middle class India.

AIRPORT MODERNISATION PROGRAM The rapid growth in traffic since 2003/04 has placed significant pressure on airport infrastructure, both in terms of runway/terminal capacity, particularly in Delhi, Mumbai and Bangalore. In order to sustain the expected traffic growth and at the same time ensure that operations remain safe, proceed efficiently with minimal flight delays and provide the customer with a pleasant travel experience, significant investment is required to upgrade and modernise India’s airports. The Government of India has announced an airport modernisation and upgrade programme with investment of INR 410 billion (US$10.5 billion) planned between 2005 and 2010.

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The following chart identifies the capacity augmentation that will be required at 15 of the leading airports in the country to meet projected demand through to 2011/12.

DOMESTIC INTERNATIONAL

Current Capacity

Projected Traffic 11/12

Capacity Required

Current Capacity

Projected Traffic 11/12

Capacity Required

Mumbai 10.0 31.5 21.5 9.1 13.3 4.2

Delhi 8.5 31.3 22.8 5.3 14.8 9.5

Chennai 4.7 12.5 7.8 3.0 5.1 2.1

Bangalore 2.7 18.3 15.6 0.5 3.3 2.8

Kolkata 4.1 10.9 6.8 0.9 1.5 0.6

Hyderabad 2.9 11.4 8.5 0.7 3.8 3.1

Cochin 1.2 1.7 0.5 1.7 2.7 1.0

Ahmedabad 0.6 5.5 4.9 0.1 1.4 1.3

Goa 0.7 4.8 4.1 0.3 0.9 0.6

Trivandrum 0.5 0.6 0.1 1.1 1.7 0.6

Guwahati 1.1 1.7 0.6 0.3 0.02

Amritsar 0.2 0.3 0.1 0.3 2.0 1.7

Srinagar 0.4 1.4 1.0 0.03 0.03

Jaipur 0.3 1.1 0.8 0.2 0.1

Nagpur 0.7 1.0 0.3 0.1 0.1

Calicut 0.5 0.3 0.0 0.4 2.3 1.9

Recognising that the process of modernising airport infrastructure will require both funding and expertise which it does not possess, the government is seeking private sector participation. In addition to the airports themselves, a critical issue sometimes overlooked, is the need to invest significantly, both physically and in terms of human resources, in modernisation of air traffic management systems, air safety and airport security. Inadequate runways, parking and terminal capacity continue to result in congestion both in the air and on the ground, adding to delays and cost of operations. Hence expansion and modernisation of airports has become imperative for the viability of the sector.

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The airport upgrade and modernisation plan set-out by the Ministry of Civil Aviation is:

Airport Projected Investment Completion Date

New Delhi (Phase I) INR 53.16 billion March 2010

Mumbai (Phase I) INR 61.30 billion March 2010

Bangalore (Phase I) INR 19.30 billion March 2008

Hyderabad (Phase I) INR 17.60 billion March 2008

Chennai INR 24.62 billion 2010

Kolkata INR 24.17 billion 2010

35 Non-Metros INR 61.62 billion 24 by 2009 / 11 by 2010

Other Non-Metros/NE INR 14.10 billion

Other Greenfield INR 120 billion

Air Traffic Management INR 27.28 billion

State governments have been requested to support the airport upgrade efforts by acquiring suitable land and clearing them of encroachments, providing utilities/services, surface access, approval of commercial developments and provision of security arrangements.

Profiles of the Major Gateways

New Delhi Indira Gandhi International Airport (IGI)

Delhi Airport handled 20.44 million passengers in the 12 months to 31 March 2007 and is the country’s second busiest after Mumbai. In light of the strong growth being experienced, and the lower constraints it faces in relation to Mumbai, it may overtake Mumbai in terms of traffic volume early next decade.

The airport is currently served by 80 domestic and international airlines operating to over 120 destinations around the world.

The airport is operated by Delhi International Airport (P) Limited (DIAL), a consortium with the following composition:

• GMR Group: 50.1%

• Fraport AG: 10.0%

• Malaysia Airports: 10.0%

• IDF 3.9%

• AAI 26.0%

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Under the Public Private Partnership initiative of the Government of India, DIAL was awarded the mandate for the modernisation and redevelopment of IGI Airport after an international competitive bid in January 2006. DIAL took over management of Delhi Airport in May 2006 and has embarked on an extensive modernisation programme. The airport currently has separate domestic and international terminals and is served by two runways. The Master Plan developed by DIAL aims to expand the facilities in a phased manner to take care of the traffic growth over the next 30 years. Phase I Under the first phase of the expansion, a new interim domestic terminal will be opened with a capacity of 10 million passengers per annum. A new Code F (A380 compatible) runway will be completed by June 2008. In addition, the existing International Terminal (Terminal 2) is undergoing renovation process which will be complete by mid-2008. However, the most important step in the modernisation process will be construction of a new integrated passenger terminal (Terminal 3) which will be ready by March 2010, before the Delhi Commonwealth Games 2010. This phase will have a total project outlay of US$2.24 billion to enable Delhi Airport to handle 37 million passengers per annum. It is expected that the passenger traffic in Delhi will grow to 29 million by 2010. Passenger traffic is forecast to reach 46 million passengers per annum by 2015 and 80 million by 2025. Aircraft movements are projected to cross 380,000 annually by 2015 and reach 600,000 by 2025. Cargo volumes are also expected to increase at a steady rate and touch 2.13 million tones a year by 2025. In later phases, another runway will be built and the existing secondary runway would be realigned to form a fourth parallel runway to cater to the growth in traffic. The airport is being designed with an ultimate capacity of 100 million passengers per annum. The Aerocity adjoining the airport will feature hotels, convention centres, shopping malls and other business and recreational facilities for travellers. As a first step, DIAL has invited bids from leading developers of hospitality facilities for the construction of hotels within the airport complex. Concessions Awarded: Duty Free: Alpha Airports and Future Group Advertising: Times Innovative Media Catering: RFP to be issued shortly

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Fuel Farm: Model being developed Ground Handling: RFP issued Car Parking: RFP imminent Mumbai Chhatrapati Shivaji International Airport The GVK-ACSA (Airports Company of South Africa) consortium was awarded the concession to modernise Chhatrapati Shivaji International Airport in January 2006. The joint venture company formed to operate the airport is Mumbai International Airport Pvt Ltd (MIAL), and it assumed operations from May 2006. Mumbai Airport is the busiest in the country and handled 22 million passengers (15 million domestic and 7 million international) in the 12 months to 31 March 2007, a year-on-year increase of almost 21%. In October 2006, MIAL announced the Masterplan for the development of the airport. The plan foresees an expansion of the infrastructure to be able to handle 40 million passengers per annum and 1 million tonnes of freight. The development is scheduled to be completed in two phases: Interim Phase by 2008:

• Refurbishment of international terminal;

• Expansion of departure facilities at domestic terminal 1A;

• Adding capacity to cargo facilities;

• Construction of rapid exit taxiways;

• Development of multi-level car park (eventually car parking spaces will be increased from 3,600 to 12,000).

Phase 1 by 2010:

• Construction of new intergrated domestic/international terminal (T2) at Sahar;

• Opening a dedicated road link from Western Express Highway to T2;

• Relocation of air traffic control tower to improve airside efficiency;

• Construction of a new parallel taxiway;

• Creation of new cargo facilities. The official Masterplan envisages the construction of a new parallel runway. Achievement of this plan involves a number of hurdles including the clearance of slum developments, relocation of Air India facilities, acquisition of private land and demolition of some private

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buildings. These are complex issues and consequently MIAL is also looking at ways in which it can maximise the capacity of the current cross-runway operation. Concessions The duty free retail concession was initially awarded to a JV between Aldeasa and the state-owned ITDC. However, after continued delays to the opening of retail facilities, the venture attempted to renegotiate the contract having concluded that the original amount bid was too high. The airport operator terminated the agreement and instead awarded the concession to DFS. The first stores opened in March 2008. Bangalore Bangalore International Airport BIAL is the owner and operator of the new Bangalore International Airport at Devanahalli, about 32km from Bangalore city. BIAL is a public limited company comprising five shareholders:

• Siemens Project Ventures (40%)

• Larsen & Toubro (17%)

• Unique Zurich Airport (17%)

• Airports Authority of India (13%)

• Government of Karnataka through KSIDC (13%) The new airport is located on a site of 4,000 acres and when it opens in late May 2008 will have capacity to handle 12 million passengers per annum. Phase I of the project will cost approximately US$480 million. It will have a terminal area of 68,631 sqm with 48 aircraft parking bays and 9 aerobridges. At that time of opening, the existing HAL controlled Bangalore airport is to be closed for commercial use, as per the agreement between BIAL and the Government of India and Government of Karnataka. However, there are currently public interest litigation cases pending with the courts, to keep the existing airport open. This matter will be watched with keen interest by international investors. Twelve international airlines currently operate to Bangalore, however once the new airport opens, this is expected to increase to twenty as a number of airlines have shown interest in launching services. Dragonair has already announced plans to operate to the city and carriers such as Swiss, Qatar Airways, Oman Air, Etihad Airways and Continental are considering services. Kingfisher Airlines has announced plans to operate from Bangalore to London and the US from late 2008.

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International traffic which hit 1.26 million passengers in 2006/07 is expected to reach 2.0 million in 2008/09. In its first year of operations BIAL is expected to handle over 11 million domestic and international passengers. Airport Access The most serious problem faced by the new Bangalore Airport is access from the city. The current road connection is heavily congested and some estimates have suggested that transfer time could be as high as 3 hours. Improved road access and a metro rail connection are at least 2 to 3 years away. Concessions Awarded Advertising: JC Decaux Cargo Handling: SATS/Air India and Menzies/Bobba Catering: LSG SkyChefs and TajSATS Duty Free & Retail: Nuance Group/Shoppers Stop (Int’l) and Shoppers Stop (dom) Food and beverage: HMS Host and Café Coffee Day Fuel Farm: Indian Oil/Skytanking Ground Handling: SATS/Air India and GlobeGround Hyderabad Rajiv Gandhi International Airport GMR Hyderabad International Airport Limited (GHIAL) was formed to design, finance, build, operate and maintain a greenfield International Airport on a 5,500 acre site at Shamshabad, located 25km from the city centre of Hyderabad to replace the existing Begumpet Airport. The airport, which opened on 23 March 2008, is a Public Private Partnership with the following shareholders:

• GMR Infrastructure (63%)

• Malaysia Airports Holding Berhad (11%)

• Airports Authority of India (13%)

• Government of Andhra Pradesh (13%). The new airport has the capacity to handle 12 million passengers per annum in the initial phase and more than 100,000 metric tonnes of cargo per annum, with a project cost of INR24.78 billion. The ultimate design capacity for the airport is to cater to over 40 million passengers per annum and 1 million tonnes of cargo. Concessions Awarded Airport Hotel: Accor (Novotel) Cargo: Menzies UK Catering: LSG Sky Chefs and Sky Gourmet

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Duty Free: Nuance Group/Shoppers Stop Consortium Food and Beverage: HMS Host, Blue Foods, Gelato Fuel Farm: Reliance Industries Ground Handling: Menzies Aviation/Bobba Lounges: Plaza Premium Lounge Chennai Meenambakam International Airport On 18th April 2007 the PM’s Committee on Infrastructure decided that the modernisation of Chennai Airport would be conducted by the Airports Authority of India and not through a PPP model as previously expected. The development plan for the airport is as follows:

• Expansion of domestic terminal building by 72,700 sqm to increase capacity from 6 million to 16 million passengers per annum.

• The international terminal building is to be extended by 64,300 square meters to increase capacity from 3 million to 7 million passengers per annum.

• Second runway to be developed to increase runway capacity to 50 movements per hour. This is expected to be sufficient to cater to airside requirements until 2015-16.

• Total project cost is estimated at INR20.62 billion and is scheduled for completion by June 2010.

Chennai Airport is located on a site of 1,152 acres. An additional 1,069 acres of land is required to enable the construction of a parallel second runway. New building activity has been frozen on this land since early 2007, however many residents continue to remain in the area as they had earlier built new homes after being advised that the land would not be acquired for the airport. Residents have submitted an objection with the Madras High Court to the acquisition notice. This legal obstacle is expected to delay the modernisation plan. Kolkata Netaji Subhash Chandra Bose International Airport As was the case for Chennai, the PM’s Committee on Infrastructure meeting on 18 April 2007 decided that the modernisation plan for Kolkata Airport would also be carried out by the Airports Authority of India. The development plan for the airport is as follows:

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• An integrated passenger terminal with annual capacity of 20 million passengers (16 million domestic and 4 million international) will be constructed. This is expected to accommodate requirements until 2015-16;

• The secondary runway will be extended by 400m and a rapid exit taxiway will be constructed;

• Apron will be expanded to increased the number of parking bays from 29 to 52;

• A new technical block and ATC tower will be constructed, along with upgrading of CNS and ATC equipment;

• A rail connection will be connected from the airport to the city.

• Project cost is estimated at INR 1,942 crores.

• Work to commence by mid-2008 for completion by January 2010.

Modernisation of 35 Non-Metro Airports The Airports Authority of India has been entrusted with the modernisation of the 35 leading non-metro airports. The task has been divided into airside and landside.

The AAI will handle all airside developments itself including construction of runways, taxiways, aprons, terminals, fire stations, control rooms, isolation bays etc.

Landside development will be carried out on a PPP basis and may include construction of hotels, convention centres, shopping malls, food and beverage outlets.

24 airports have been identified for immediate modernisation, with the remaining 11 being deferred due to a shortage of land to be able to implement the proposed plans. Details of the airports being modernised, with planned levels of airside investment and estimated completion dates are as below: AIRPORT PROJECT COST COMPLETION DATE

Agra INR 150 million Completed

Agartala INR 750 million Mar-2010

Agatti INR 230 million Dec-2007

Ahmedabad INR 3.85 billion Domestic Dec-2007 International Feb-2009

Amritsar INR 800 million Dec-2007

Aurangabad INR 1.35 billion Jul-2008

Bhopal INR 1.05 billion Mar-2009

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Bhubaneshwar INR 1.23 billion Mar-2009

Chandigarh INR 1.25 billion Mar-2009

Coimbatore INR 1.13 billion Mar-2010

Dehradun INR 1.15 billion Dec-2008

Dimapur INR 800 million Dec-2009

Goa INR 3.09 billion Sep-2009

Guwahati INR 1.95 billion Dec-2009

Indore INR 1.70 billion Dec-2008

Imphal INR 550 million Dec-2009

Jammu INR 750 million Dec-2008

Jaipur INR 1.30 billion Oct-2007

Khajuraho INR 1.35 billion Dec-2008

Lucknow INR 1.70 billion Dec-2008

Madurai INR 1.70 billion Dec-2008

Mangalore INR 2.52 billion Dec-2008

Nagpur INR 850 million Dec-2007

Patna INR 1.35 billion Mar-2010

Port Blair INR 500 million Dec-2009

Pune INR 500 million Mar-2009

Raipur INR 1.35 billion Dec-2009

Ranchi INR 1.15 billion Dec-2008

Rajkot INR 1.55 billion Dec-2009

Trivandrum INR 3.55 billion Domestic Dec-2009 International Dec-2008

Trichy INR 1.45 billion Sep-2007

Udaipur INR 1.25 billion Jul-2007

Vadodara INR 1.73 billion Mar-2010

Vizag INR 2.55 billion Dec-2007

Varanasi INR 1.12 billion Dec-2008

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AAI has appointed two consultants – UTI Bank Limited Mumbai and Capital Fortunes Limited Hyderabad to assist in selecting the JV partners for the landside development. The Ministry of Civil Aviation estimates that up to INR410 billion may be invested by the private sector in landside developments at non-metro airports over the next 4 to 5 years. The airports from the above list for which non-availability of land may limit the development of landside activity include: Agatti, Agra, Chandigarh, Jammu, Pune, Dehradun, Goa, Raipur, Bhubaneshwar and Port Blair. The tender process for Udaipur and Amritsar airports is currently in progress. Trichy, Vizag and Coimbatore are expected to be the next airports to follow this process. Planned Greenfield Airport Development Planned and proposed Greenfield airport projects in India currently include:

Navi Mumbai: Cabinet has approved the development of a second airport for Mumbai due to the capacity constraints at the existing facility which limit future expansion. A site has been identified, however some environmental issues have recently been raised which could delay the project.

Greater Noida: this proposed airport, located at approximately 70km from Delhi en route to Agra, would effectively serves as the city’s second airport. However, DIAL, operator of Delhi Airport has raised objections that its concession agreement restricts the development of a new airport within 150km of an existing international airport, stating that its masterplan will keep capacity well ahead of projected traffic and that a second airport is not required. Cabinet is expected to take a decision on this project in 2008.

Kannur: construction of a fourth airport (to join Trivandrum, Cochin and Calicut) for the State of Kerala is under consideration. A Cabinet decision is pending.

Goa: a greenfield airport is proposed for construction at Mopa which was expected to replace the current facility at Dabolim. Tourism operators in the South of the state had raised concerns that they would be disadvantaged due to the location of Mopa in the North. The Chief Minister recently announced that the existing facility will remain operational which should help progress the project.

Mohali: the state government of Punjab has announced plans for a PPP greenfield airport at Mohali as the current facility at Chandigarh has insufficient land for expansion.

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Amravati: Cabinet recently approved the construction of a Greenfield airport at Amravati in the Vidarbha region of eastern Maharashtra.

Northeast India: the state government of Sikkim has plans to develop an airport at Pakyong near Gangtok, to accommodate up to 70 seater aircraft. There is currently no airport in the state of Sikkim, and passengers must travel to Bagdogra. Other airports in the North East for which techno-feasibilities are expected to commence shortly include Cheithu and Itanagar. The Prime Minister’s Office strongly supports the development of airport infrastructure in the North East which should see another 3-4 projects announced in the region.

Cargo & Logistics: dedicated freight airports currently under discussion include Durgapur (promoted by HUDCO, with Changi Airport providing advisory services) and Gwalior, with a further 3-4 serious projects believed to be in the pipeline. The Ministry of Civil Aviation is in favour of non-passenger airports being cleared without Cabinet approval.

Merchant Airport Policy: a policy on the development of 100% private airports (termed “merchant airports”) which are most likely to be for the purposes of freight and logistics operations as noted above, is currently under consultation and expected to be forwarded to Cabinet for approval shortly.

Greenfield Airport Policy: the policy on development of Greenfield airports is expected to be announced in the first half of 2008. One of the key issues to be addressed is the current restriction which states that no Greenfield airport may be constructed within 150 km of an existing airport.

Low Cost Airports & Terminals

The rapid expansion of low cost carrier services in India will have a number of implications for airport operations. Low cost carriers have been responsible in some cases for developing services to previously underconnected or even unconnected cities eg. Air Deccan operates to airports such as Kandla and Hubli which previously had no commercial services. The pressure to reduce costs may also lead to a change in the relationship with airports. In many parts of the world airports have built, or are developing, dedicated low cost terminals with reduced services but charging lower fees. This is a feature that will also appear at Indian airports.

Delhi and Mumbai Airports have both revealed plans to develop dedicated low cost terminals, however other proposed sites in India for LCC Airports include:

Maharashtra: the Maharashtra Airport Development Corporation (MADC) is charged with the responsibility of sourcing private investment to develop a network of budget airports

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across the state. Sites under consideration include: Kolhapur, Latur, Ratnagiri, Nanded, Osmanabad, Sholapur, Karad, Sangli, Amravati, Gondia, Shirdi, Jalgaon, Akola, Naramati.

Karnataka: proposed locations for budget airports in the state include Shimoga, Gulbarga, Hassan, Bijapur, Bellary, Karwar. The airports at Shimoga and Gulbarga will be developed on a PPP model, and the Maytas-Vienna Airport consortium has been granted a 30 year lease for both airports.

Tamil Nadu: the state government is considering a number of locations eg. Tuticorin and Sriperumbudur, for redevelopment of existing/unutilised airfields as well as construction of greenfield facilities. Other states evaluating the low cost airport model include Andhra Pradesh, Kerala, Punjab, Rajasthan and West Bengal.

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