Monday, 23 February 2009

Cochin International Airport: a model for Kerala and India

Back in the 1980s, when I was in my early teenage years, I would go on holidays to Kerala, India, with my parents. We would invariably fly to Bombay in western India, and then take a domestic flight south to Cochin. I remember the small airport in Cochin well. After a flight adjacent to the Indian coastline, the aircraft would swoop down and upon landing, the pilot would immediately apply full reverse thrust and generous braking to slow the aircraft down, as the runway was short. The airport terminal was small; at best, it was capable of handling a couple of flights at any one time. When aircraft arrived or departed from the terminal, the building would reverberate with the sound of the jet engines, making conversation difficult. The airport was actually a naval airbase on Wellington Island that was converted for civilian use.

Everything changed at the end of the 1990s when a new, bigger airport was opened in Nedumbassery, 30km from Cochin city centre. The new airport, which replaced the old naval airport, was the result of a public-private partnership (PPP), with the government only having a minority stake. The government of Kerala, unable to provide funding for the entire project, sought private funding, and the response from Non Resident Indians (NRIs), who had long desired an international airport in Cochin to avoid having to take a detour via Bombay, was overwhelmingly positive. Nearly 10,000 NRIs from 30 countries contributed to the project. The total project cost Rs3.15 billion (about US$68.4 million), which was low cost compared to many other airports. This was the first time an international airport in India was built with only a minority (13%) central government stake.

Today, Cochin Airport is the fourth busiest airport in India in terms of international traffic, with passenger traffic continuing to grow. It handles more than 400 services in the domestic sector and more than 300 services in the international sector per week. It has a 3,400m long runway, which is the second longest in India, and besides Mumbai, Delhi, Chennai, Bengaluru and Hyderabad, it is capable of handling all types of commercial aircraft including the Airbus A380. The duty free shops, which currently contribute a substantial amount of the airport revenues, have also earned the reputation of being amongst the lowest priced in the Asia-Middle East region. Recently the airport has opened one of the largest cargo centres in India, providing a major boost to the movement of perishable cargo from Kerala.

There are plans afoot by Cochin International Airport Limited (CIAL), the public company that owns the airport, to build an aerotropolis (airport city) around the airport. To fund this ambitious plan, CIAL will tie up with two international airport developers, and float 26% of its equity between April and December 2009. The aerotropolis project will develop 450 acres of land with a view to increasing non-aeronautical revenue. The aerotropolis will include, among other things, the following:

  • Aircraft Maintenance, Repair and Overhaul (MRO) facility
  • Aviation Academy
  • Star/budget hotels
  • 18-hole world class golf course
  • Convention/exhibition centre
  • Amusement parks
  • Shopping malls
  • Food Court
  • Super Speciality Hospital
  • IT park

The aim is to increase non-aeronautical revenue to such a level that the airport will be able to operate profitably without depending so much on aeronautical revenue, so that by 2015 the airport will be able to scrap aircraft landing charges to airlines.

For a state that has always been very sceptical about free markets, the success of Cochin Airport demonstrates what can be achieved through collaboration between government and private enterprise. One of the main reasons for the airport’s success is that the government has not interfered in its management, leaving all decisions to be made by the board of directors. The present Chief Minister of Kerala, V S Achuthanandan, is also the chairman of the board. Having a chief minister as the head of the board helps to get clearances quickly and certain benefits from the government; and in turn the airport, aware of its social responsibility, provides employment and opportunities to many people, promotes tourism, and acts as an essential gateway for Kerala to the outside world.

Kerala is notorious for the large number of strikes, due to powerful trade unions and political parties, which bring the state to a grinding halt on a frequent basis and cause massive losses to the state exchequer. Many companies either avoided setting up office in Kerala or moved out from the state for this particular reason. While other southern states like Karnataka and Tamil Nadu experience rapid economic growth, Kerala is a laggard in comparison. It has become dependent on remittances from NRIs abroad, which contribute a substantial part of the economy. This is an indefensible position. The success of the new airport at Cochin, which has been a model for other new airports in the region, shows what can be achieved through benevolent capitalism. When government maintains a hands-off approach, private enterprise can deliver the goods to the benefit of all, providing that it also maintains a sense of social responsibility.

1 comment:

vinesh said...

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