Soon Kerala will get its fourth international airport at Kannur, a distinction second to none. The state, which has a coastline of just 580 kms with a varying width of 35 to 120 kms, has certainly dwarfed many states which are bigger in size and better industrialised. Sounds good. But then, was there actually a need for one?
Sisir Pradhan | March 2016 Issue | The Dollar Business
India’s first international airport in a non-metro city (Trivandrum) and the first airport to be built under public-private partnership (Cochin) are both in Kerala. What’s more? Soon the state will have its fourth international airport at Kannur making the god’s own country the No.1 state in the country, in terms of count of international airports.
International airports due to the very nature of being gateways to the world have remained one of the prime yardsticks to measure the economic conditions of a region. The aviation sector has one of the highest output and employment multiplier which are 3.25 and 6.1 respectively, that means every Rs.100 spent in the sector results in an addition of Rs.325 to the GDP and every 100 direct jobs created in the sector results in 610 jobs in the larger economy. And no doubt Kerala has been a champion of these economic multipliers. But, is it the highly mobile population from the state that fuels the growth of aviation sector in the state or the developed aviation sector which tempts people from the state to fly around the globe?
The state, due to political, trade union and ecological reasons has remained one of the least industrialised states in the country. Hence, people in search of employment have flocked to Gulf countries. Moreover, the state has historically remained an epicentre for spice, fruit and vegetable trade. Hence, the demand for air infrastructure has always existed. But what has encouraged the state to become an active player in aviation infrastructure? The answer lies in Cochin, the country’s first airport to be built in PPP model. It is a profit-making one!
Kannur International Airport (KIA) will be the second airport in the state to be constructed in the PPP mode. This when many large-scale infrastructure projects across various parts of the country remain stalled because of conflict of interests on various grounds, largely related to acquisition of land. In fact, in some cases forceful execution of projects have even ended in violent protests.
So, what makes PPP airport projects click in Kerala? The answer comes from the Managing Director of KIA, G. Chandramouli. “The local government has actively taken part in development of airports made under the PPP mode. The stakeholders of the project are locals which is like the airports in US where the mayor and the local community take decision with regard to the administration and operation. It helps get co-operation from the local community, which in turn results in faster decision making. And here the state Chief Minister is the Chairman of the company due to which regular performance monitoring and performance enhancing takes place,” Chandramouli tells The Dollar Business.
Land is precious in the state because of scarcity and also because it is a major source of agriculture earning. Hence, getting lands in Kerala is a difficulty second to none. Emotions run high when it comes to letting the land go and political parties always try to take mileage out of that in any part of India. However, in Kerala the ruling and the opposition came together in having an airport at Kannur as it will benefit them as well.
The airport will cater to the needs of northern areas of Kerala, parts of Karnataka, including Coorg, Mysore and nearby areas. There is good potential to get users from Mysore as the upcoming airport at Kannur will be closer to Mysore than the Bangalore airport.
A large number of NRIs and business travellers from northern parts of Kerala and southern parts of Karnataka depend on Calicut airport. However, due to runway re-carpeting work at the airport, many airlines have diverted to Cochin, which is about 290 kms away from Kannur. Moreover, Calicut airport has a limited land bank of just 400 acres, which leaves little scope for expansion and upgradation. KIA due to its proximity to the Gulf countries also has a strategic significance, a reason why many airlines from the oil-rich region have shown interest in operating from the airport. The airport officials say they have already received requests from Emirates, Etihad, Oman Airways, Fly Dubai, Qatar Airways, Air India and Jet Airways to operate from KIA and the proposal is awaiting approval from the Union government.
More importantly the project is the first greenfield airport in the state and has a land bank of 2,000 acres which allows its operators to benefit from airport-based industrial potentials including airline maintenance, repair and overhaul (MRO). In fact, Hindustan Aeronautics Limited (HAL) has asked for some land to have their manufacturing base for helicopters that they plan to export. Furthermore, the Union government has revised the Draft National Civil Aviation Policy (NCAP 2015) with the aim of giving a boost to aviation sub-sectors, like airlines, airports, cargo, MRO services, general aviation, aerospace manufacturing, and skill development. The new airport will also benefit from the Regional Connectivity Scheme (RCS) which will come into effect from April 1, 2016.
Apart from the proposed heavy industry, the airport is looking forward to tap opportunities arising from exports of marine and fishery products from Kerala and nearby states. Prevalence of a large number of processing units for dry fruits and spices, which are currently moving out of Kannur by multimodal transport systems and then being exported either through seaports in Cochin and Chennai or through Chennai and Trivandrum airports, are likely to use Kannur airport as it will help them save freight costs. The region also has a good number of export-oriented textile, handloom and handicraft industries which will benefit from the airport.
The airport is also looking for business opportunities from cargo originated from industries based in and around Mangalore, which is located just 140 km away. Coorg, in Karnataka which is located at a distance of 70 km from the new airport, is a hub for coffee and tea plantations, produces of which are primarily exported. Moreover, during ten months in a year, cut flowers are also exported from Coorg. If Kannur airport can tap into these markets, it would mean a steady flow of revenues for it in the near future.
To aid ease of connectivity between the airport and hinterland, seven roads are in the pipeline and a rail corridor has been proposed between Thalassery, Mysore and Coorg. The new airport is being developed under the direct supervision of the state Chief Minister, and since the state is going for election later this year, the ruling party will try its best to time the inauguration of the airport before the model code of conduct comes into effect. In fact, the airport is looking for trial runs soon (it is rumoured the first test flight will touch down at the airport on Feb 29, 2016) and the officials are hopeful that the airport will be in operation by September 2016. So if all goes as per schedule, god’s own land will witness a repeat of the success alike the Cochin International Airport. All we can say for now is the aviation sector in Kerala is a true implementation of ‘Sabka Saath Sabka Vikas’.
TDB: Please give us a brief overview of the new international airport which is coming up at Kannur.
G. Chandramouli (GC): Kannur is the gateway to the north Malabar region. In Kerala it includes Kasargod and Kozhikode districts, parts of Wayanad district and nearby areas. These regions have a huge number of non-resident Indians who are largely settled in Gulf Cooperation Council (GCC)-member countries. Today, they go to Calicut International Airport or Mangalore International Airport to fly to international destinations. Time and again there have been demands from people of the region to set up an international airport. Such an airport was envisaged in the region for the first time in the late 1980s. However, the proposal for the green field airport was given in the year 1997, which got administrative approval from the state government in 1998. The project got in-principle approval from the Ministry of Civil Aviation in 2008. Finally, in 2009, Kannur International Airport Limited (KIAL) was founded as a public limited company. The project got clearance from the Ministry of Environment in 2013.
TDB: How has the experience with regards to the execution of this mega project been?
GC: The success of an airport project depends on three things: land, a proper contract, and availability of funds. Timely decision-making plays a vital role in effective execution of such large scale projects and Airports Authority of India (AAI) has given us the freedom in this aspect. I give credit to the state government for acquisition of land for the project and once the land is in place the first major hurdle for the project is taken care of. A special package was announced by the government to pay to the land losers and there was employment opportunity for people who were displaced.
Decisions related to awarding contracts were made quickly. For example, the evaluation of all bids for engineering, procurement and construction (EPC) contracts and decision to award the contract was made in one business day. The contract was awarded in November 2013 and the construction work started in February 2014. Moreover, having a good EPC contractor also ensures speedy execution of a project.
In Kerala we have six-month monsoon in a year, so we have to execute major construction work in just six months. But we have been able to complete construction of 70% of the runway and more than 55% of the terminal building between the period February 2014 and February 2016 and we are hopeful that all the construction work will be completed by September 2016 and the airport is expected to be fully operational. After completion, the length of the runway at the Kannur airport will be 3,050 metres. Passenger handling capacity at Kannur will be 5 million passengers per year. Apart from the climatic conditions, we also have to deal with the difficult hilly terrain. We have an engineering challenge to cut the mountains and do the land filling to get a uniform flat ground to build the airport, which requires us to move 200 lakh cubic metres of laterite-rich soil, which is even more than earth movement required in some of the dam projects. But still we are trying to complete the project in the stipulated schedule of 3 years. So far we have completed construction of 2,400 metres of the runway and apron. We are planning to have a trial landing of Code-B type aircraft soon. The runway is designed for landing of Code-E aircraft, which includes most aircraft that operate in the region, including Boeing 777 & 747. Though the runway is short by 400 metres to accommodate the Airbus 380.
TDB: What are the major advantages of this airport?
GC: Though the airport is located on a hill top, it complies fully with the international civil aviation requirements (CAR) and the safety and security compliance of Director General of Civil Aviation. The airport will cater to the needs of northern areas of Kerala, parts of Karnataka, including Coorg, Mysore and nearby areas. There is a good potential to get users from Mysore as this airport will be closer to Mysore than Bangalore. We have already got requests from Emirates, Etihad, Oman Airways, Fly Dubai, Qatar Airways, Air India and Jet Airways to operate from KIA. We are awaiting an approval from the Union government.
TDB: Why have big infra projects executed through PPP been so successful in Kerala?
GC: There are two reasons that have made such large-scale projects successful in Kerala. The state government is a promoter and it is more than cooperative as far as public-private partnership projects go. Moreover, the state Chief Minister is also the chairman of the company, due to which regular performance monitoring and enhancing take place. The stakeholders of the project are locals like airports in US where the mayor and the local community take decisions with regard to the administration and operation. It helps in faster decision-making.
TDB: What is the expectation from the new airport in terms of traffic?
GC: We are expecting to break-even in 4-5 years if there is heavy traffic but if the traffic is slow then it might go up to 7-8 years. Most of the passenger traffic that we are expecting is the NRI community. We are expecting 1.5 million (1.47 million international and 0.3 million domestic) passengers in the first year of operation. The region has also some scenic places like Coorg, Wayanad, Bekal beach, which are yet to be explored to their full potential. These places can open avenues for inflow of tourists.
TDB: The new Draft Civil Aviation Policy opens up new avenues for revenue. How are you planning to tap revenue potentials like MRO and cargo?
GC: We have a land bank of 2,000 acres, which allows us to look for business opportunities including airline maintenance, repair and overhaul (MRO). There is a growth potential for airport-based industries under the Make in India initiative. In fact, HAL has asked for some land to have their manufacturing and export base for helicopters here.
Currently, passenger flights need to carry 5 tonne of cargo to remain economically viable. There are a lot of flowers, fruits, vegetables originating from various parts of Tamil Nadu, Kerala and Karnataka. Kannur due to its proximity to these regions has the potential to be an export gateway. We are anticipating 20,000 metric tonne of cargo every year. We will start on a small scale and based on the demand we will gradually increase cargo handling capacity. Being an international airport, we will have custom-bonded facilities.