How Sustainable are the New International AIRPORTS ?

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How Sustainable are the New International AIRPORTS ?

--BY TAMISH GIRI

If everything goes as planned, Nepal will soon have second and third international airports, as the construction of Gautam Buddha International Airport (GBIA) and Pokhara International Airport (PIA), two national pride projects, is expected to be completed by 2022.

Travel entrepreneurs are eagerly awaiting commencement of these two new projects, which could work as a catalyst in ramping up international tourist arrivals. Nepal, despite being a reservoir of natural beauty, has so far been able to attract only around a million or so foreign visitors a year. There are many reasons for subpar performance of the tourism sector. And one of them is congested Tribhuvan International Airport in Kathmandu, which, so far, is the only international gateway for passengers and goods entering and exiting Nepal via air.

The two new airports have the potential to give a fillip to Nepal's tourist arrival numbers, as they are being built in strategic locations. The GBIA is located in Buddha's birthplace Lumbini and will serve Buddhist pilgrims from across Asia, whereas PIA is situated in the lake city of Pokhara and will cater to adventure seekers bound for world-renowned Annapurna Trekking Circuit. Both Lumbini and Pokhara are now seeing an influx of fresh investment in the hospitality sector, as travel entrepreneurs are hoping to cash in on hordes of foreigners that are expected to land in these two locations.

There are now fears that these beacons of hopes may not be able deliver expected results, as the operator of the two airports neither has targets and estimates for first few years of operation, nor a comprehensive marketing strategy to attract airlines and passengers.

Any business, before it comes into operation, conducts a study on costs involved in staffing, day-to-day operation, marketing and other related expenses. Based on these estimates, businesses make projections on minimum income they must generate to remain afloat. These projections provide the businesses a fair idea on targets that they need to set and pitfalls that should be avoided.

In private conversations, officials of international airline companies said specific business plans are a must for the sustainability of the two projects. “A key objective of planning is to assure effective use of resources to fulfill the demand in a financially feasible manner. Therefore, it is essential to have a master plan for the operation of the airports,” an official of an international airline said on condition of anonymity fearing retribution from government officials.

But the Civil Aviation Authority of Nepal (CAAN), the aviation sector regulator, which also oversees operation of all the airports in the country, does not have any target or projection on income and expenses of the two new facilities.

Earlier, the Asian Development Bank had prepared a business plan for the GBIA as the key lender in the project, but that needs to be updated. It is not known whether a business plan was ever prepared before building PIA, as the CAAN is not aware of it, while officials of the Ministry of Finance, which secured credit from the Chinese Export-Import Bank to finance the project, did not want to comment on this issue.

This indicates the two airports will come into operation in a haphazard manner and may even fall short of generating adequate income to cover overhead expenses, adding financial burden on taxpayers.

Airports generally generate a big chunk of revenue from charges levied on passengers. They also derive income from aeronautical charges for navigation, landing and parking service, which vary based on type, capacity and weight of aircraft.

Internationally, airports with large passenger traffic are profitable. The majority of airport revenue, about 56 percent, is generated from aeronautical activities such as a terminal, landing, and passenger charges paid by airlines. Almost 40 percent of the revenue comes from non-aeronautical activities, such as car parking, advertising, and car rentals, and the remaining four percent is generated from non-operating activities, such as passenger facility charges and bank interest.

On average, its costs USD 13.55 per passenger to operate an airport. However, this varies according to the size and location of the airport. For example, London Heathrow Airport, among the busiest in the world, needs to generate around USD 19 per passenger to break even.

To streamline the operation of GBIA, CAAN is planning to handover the ground handling work to Nepal Airlines. The aviation sector regulator is also mulling over handing over the management of the entire airport to a foreign company under the government-to-government (G2G) agreement.

"Previously, we had selected Munich Airport to manage the operation of the entire airport, but the plan to handover the management to the German company was later dropped as it courted controversy due to various reasons,” says Rajan Pokharel, director general of CAAN. “We will now call a global tender and select a managing partner in a transparent manner."

Over the last couple of years, Nepal has felt an urgent need to build a second international airport due to sharp jump in flight operations and passenger movement at Tribhuvan International Airport (TIA). In 2019, TIA handled approximately 4.3 million international and 2.9 million domestic passengers hosting 28 international carriers offering direct connections to 28 destinations in Asia and Europe.  The airport has a capacity to handle 1,350 passengers per hour but is seeing flow of 2,200 passengers during peak hours. TIA also lacks adequate technology for Instrumental Landing System and sufficient space for flight expansion to cope with the growing air traffic, which has led the CAAN to search for other alternatives. In recent years, there have been instances of in-bound international flights being diverted to Chaudhary Charan Singh International Airport in Luknow, India from TIA due to congestion.

To better manage passenger flow, the CAAN had proposed to build an international airport in Nijgadh. But it is not known whether that project would ever be built as pressure from environmentalists has mounted because an entire forest needs to be flattened to start its construction.

The GBIA has thus emerged as an alternative and is expected to ease TIA’s traffic. The airport has an estimated capacity of handling 400 passengers every hour and can accommodate wide-body aircraft of Boeing 777-200 and Airbus A 330-300 series. Currently, preparations are being made to install aeronautical equipment at GBIA to start test flights. The airport’s Project Chief Prabesh Adhikari says that 96 percent of the equipment has been installed and test flights will be conducted from May.

CAAN Director General Pokharel says that GBIA will take charge of 15 percent of the air traffic of TIA by 2025, and some international airlines from the Middle East had expressed willingness to fly to and from GBIA before the coronavirus outbreak last year.

"Lately, there has been no substantial development as the Covid-19 pandemic is not over yet," Pokharel says. "But we have plans to conduct all Middle East bound flights carrying Nepali migrant workers from GBIA. Airlines seeking additional slots at TIA or new airlines flying to Nepal will also need to operate their flights from GBIA."

There is a caveat though. It needs to enter into a deal with Airport Authority of India (AAI) to shorten the travel time for airlines. Nepal has previously requested AAI to allow GBIA-bound aircraft to enter its territory from the airspace over Nepalgunj to reduce the flying distance, and operating cost of airlines. But Indian authorities have not extended that permission citing GBIA's proximity to the Indian defence base in Gorakhpur. GBIA is located in Bhairahawa, which borders the Indian town of Sunauli.

But Pokhrel says that GBIA does not need that permission as international flights can enter Nepal from Simara, the gateway for most of the airlines flying to Nepal. “We have, however, requested AAI to provide that airspace and are awaiting response,” he says.

Airlines always look for the shortest route available to enhance cost efficiency of air transport. "Our government should negotiate with India to create economically viable air routes," says Sanjeev Gautam, former director general of CAAN.

Around 180 km from GBIA, the under-construction PIA is also likely to face similar problem, as India has not opened up the Mahendranagar route for bigger aircraft flying to Nepal, fearing air traffic congestion in its airspace around that region would worsen. Operating cost of airlines flying to PIA will come down if this air route is provided.

Originally scheduled to be completed by June this year, the construction of PIA has been pushed to December due to the pandemic. So far, 72 percent of the project has been completed.

“After it becomes operational, the airport will be capable of handling approximately 70 flights and 610 passengers during peak hours,” informs Binesh Munankarmi, project chief PIA. "The apron of the airport has parking facilities for narrow-body Boeing 757 and 767 and ATR-72 as well as Beech aircraft."

A survey commissioned by Buddha Air to study the types of aircraft suitable for the runway and apron of PIA, also found that the airport can only accommodate narrow-body aircraft like the Airbus-319. This means that the airport is only suitable for small-sized short-haul planes and is unlikely to make a significant impact on Nepal’s international flight operations.

According to CAAN officials, no international airline has shown interest to operate flights from the airport. They doubt that PIA will ever recover its investment of USD 216 million. “There were concerns about the viability of PIA within CAAN, asthe project started basically due to political pressure,” said a CAAN official on condition of anonymity. This has raised the spectre of PIA meeting the fate of Sri Lanka’s Mattala Rajapaksa International Airport. The second international airport of Sri Lanka, which came into operation in March 2013, has been termed ‘the emptiest airport in the world’ by the western media due to the very low number of flights from its inception and no flights from 2017 onwards.

The PIA is also facing another problem related to flattening of hill tops near the project site. In early March, a meeting of the Council of Ministers gave the approval to flatten the tops of two hills in Rithepani by 40 metres and 12 metres, and cut down trees so as to clear the landing approach for the eastern part of airport’s runway. But CAAN officials say that it will take months to conduct environmental impact assessment (EIA) before the hill tops are flattened and trees are cut down.

New airports like PIA and GBIA can only attract airline companies if they ensure safe operation and offer quality services, according to Abdullah Tuncer Kececi, Nepal country manager of Turkish Airlines. “The physical and geographical conditions of the airports are crucial. Airlines decide on types of aircraft suitable for such airports based on these factors. Also, costs related to fuel and ground handling have to be considered for the feasible operation of airlines," says Kececi.

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