BIAL - G1

BIAL – First Greenfield Airport on PPP Model in India

GROUP – 1P.K.Jain, Shiv Nandan Kumar and Ajay Mathuria

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Cargo Terminal

Haj Terminal

City Side t

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Contents

Background and Details

Birds eye view of the Airport facilities

Major concern areas

The big question

Conclusion

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Cargo Terminal

Haj Terminal

City Side t

Situated at the Highway NH7, 35 km to the north of the city. It is spread over an area of approximately 4000 acres

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Airport sector needed investment of INR.40,000 Crores by 2012

Combination of developmental experience, operational expertise and investment capability from the international arena with reputable local stakeholders.

Maximized investment efficiency in terms of risks allocation;

Placing economy on the Path of high growth trajectory by attracting FDI

Success in PPP model in CIAL under Brownfield category

Push factors for PPP in the Airport sector

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• Bangalore International Airport Limited (BIAL) is a public limited company under the Companies Act formed to build, own and operate Bangalore„s Greenfield private sector-owned and operated airport

• Private promoters hold a 74% (Siemens Projects Ventures – 40%, GVK – 29% and Unique Zurich – 5%) stake in BIAL while the government holds the remaining 26% (Karnataka State Industrial Investment and Development Corporation – 13%, Airport Authority of India – 13).

• 33 airlines currently operate from this airport and connect the city of Bangalore to over 49 destinations directly

• It won the Routes Asia airport marketing award in the year 2009

• Reported an overall growth of 14% over 2008-2009, ending March 2010

• Create an all new record of handling the highest number of passengers on a single day on May 21st - 37,015 passengers.

• Attained a million mark by handling 1,043,412 passengers in May 2010 for the first time

BIAL – Quick Facts

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• May 03 1999 - Memorandum of Understanding signed between AAI & KSIIDC

• Jun 1999 - Expression of interest invited

• Nov 08 2000 - Bidders asked for DPR

• Oct 29 2001 - Siemens-led consortium selected by GoK

• Jan 23 2002 - Shareholders agreement

• Jul 05 2004 - Concession agreement signed between GoI - GoK - BIAL

• Jan 20 2005 - State support agreement signed between GoK - BIAL

• Jan 20 2005 - Land lease agreement signed between KSIIDC - BIAL

• Mar 11 2005 - EPC - BIAL, Siemens (Germany), L&T and Siemens India

• Mar 30 2008 - Airport opening date

Project Milestones

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• Apr 08 2005 - Operation & Management services agreement - BIAL & Unique Zurich

• Apr 06 2005 - ATM agreement between BIAL and AAI

• Apr 30 2005 - Land lease deed between BIAL and KSIIDC

• Jun 10 2005 - Extension of shareholders agreement

• Jun 22 2005 - SBI guarantee to BIAL on state support of Rs. 350 Crores

• Jun 23 2005 - Declaration of financial closure by ICICI Bank

• Jul 02 2005 - Construction commencement date

• May 24 2008 - Airport opening date

Project Milestones

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• The Government of India has granted BIAL the exclusive right and privilege to carry out the design, development, financing, construction, operation and management of the airport for a period of 30 years from the Airport Opening Date with an option to extend such concession for a further period of 30 years.

• Bangalore currently is the fourth largest airport in India and is among the fastest growing.

Concession Agreement and Shareholding pattern

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Project Cost and Financing

Initial Cost 1411.79 crore

Revised Cost 1930.79 crore

Completion Cost 2470.00 crore

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Legal Framework

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• The Master Plan of the Bengaluru International Airport was developed to fulfill the need for an operationally efficient and passenger friendly airport for the city.

• To ensures that the size and capacity of the airport facilities can be gradually expanded based on the passenger and cargo growth

• Expansion of terminal 1 is scheduled to begin towards the end of this year and when completed, Terminal 1 will be expanded by 70% of the existing building

• This addition will take the terminal capacity to 17 million passengers per annum, a requirement that will suffice till the year 2015

• Bangalore is poised to become an important aviation hub for the South of India.

BIAL – Master Plan

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Airport Hotel -

• The Trident Hilton airport is five star hotel which is part of the Oberoi Group; this was to open by early 2009 but has been delayed and is at present under construction bang opposite terminal - 1. The hotel with a capacity of 321 rooms is approximately 200 meters opposite the terminal and is just 5 min walking distance from the airport terminal.

Second Runway –

• As part of the Master Plan work on construction of second runway is expected to commence in Q-4 this year

• This will come up parallel to the cargo terminals on the opposite side of the current runway

Airport Hotel and Second Runway

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AAI to procure, design, install, test and commission and to coordinate the following services at the airport as appropriate to the airspace configuration :-

• Aerodrome Control Service including surface movement control or ground control

• Approach Control / Approach Radar Control Service

• Area control / Area Radar control service

• Associated services such as Aeronautical Information Service, Flight Information, Service, Advisory Service, Alerting Service and Search and Rescue Coordination services as appropriate.

• AAI will ensure the provision of Aviation Meteorological Services at the airport.

• The provision of these services will be governed by the ATM agreement between BIAL and AAI.

ATM functions provided by Airport Authority of India (AAI).

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Security – Anti Hijack and Anti Sabotage

– BCAS responsible for deploying CISF to protect and safeguard civil aviation operation

Immigration

Bureau of immigration (Ministry of home affairs)

Customs

Import and exports clearance and revenue collection

SOVEREIGN FUNCTIONS RETAINED BY THE STATE

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The 5 levels of screening system:

• Level 1 – Automatic detection of explosives by Level 1 x-ray machines.

• Level 2 – Operator scan of Level 1 pictures of the bags rejected by the Level 1 automated X-ray machines

• Level 3 – Detailed inspection of the bags rejected by the operator at Level 2, with the help of highly sophisticated X-ray machines with 3D visibility.

• Level 4 – Bags rejected at Level 3 will be subjected to testing by an Explosive Trace Detection System.

• Level 5 – Rejected bags will be examined in the presence of the passenger

Five level screening system

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• Public Announcements (PA) system

• Luggage Wrapping machines near check in desks

• The airport is equipped with 53 check-in counters

• Common Use Terminal Equipment (CUTE)

• Flight Information Display System (FIDS)

• FIDS information is collected by the Airport Operational Database (AODB) through critical interfaces with the ATC system, AFTN (Aeronautical Fixed telecommunication Network), CUTE and SITA telex system

• Baggage Handling System (BHS) – 53 check in counters are arranged in three islands, with each check-in counter in the island linked to a main baggage conveyor via weighing, labeling and induction conveyor belts

The Passenger Terminal Building - In line with IATA

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The Major Partners

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• Aviation Fuel Facility: A consortium consisting of Sky tanking and Indian Oil will build and operate the Fuel Farm and Hydrant System on a truly open access basis

• Cargo Facility: Two consortia and one independent express terminal - SATS / Air India and Bobba Group / Menzies Aviation / DHL-BD build and operate a state-of-the-art general cargo warehouse for both domestic as well as international cargo. The combined area for both warehouses is approximately 15 acres with an initial capacity to handle approximately 300'000 tons of cargo

• Flight Catering: LSG Sky Chefs and Taj SATS have been selected as the Flight Caterers of the Airport

• Ground Handling: Consortia of Globe Ground India and Air India / Singapore Air Terminal Services (SATS) are responsible for providing ground handling services and for procuring the ground handling equipment required for operation

• Airport Hotel: BIAL has selected the Oberoi Group to operate a first class international hotel of competitive scale and standard under the Trident Hilton brand. This truly will be the first Airport hotel in India within walking distance from the terminal building.

The Major Partners

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Multiple stakeholders scenario adding to the complexities

Stakeholders

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Cargo Terminal

Haj Terminal

City Side t

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Security check queuing area

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Passenger Boarding Bridges

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Haj Terminal

The Air Side - Runway

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YTD May 2010 VS YTD May 2009 total shpts increased 29.0% from 291,212 shpts to 374,622 shpts

Volume trend - Throughput (Inbound & Outbound)

Data Source :SATS and Menzies

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

0

500

1000

1500

2000

2500

3000

3500

Inbound Monthly 22610 22233 26799 28037 28213 27165 32249 29823 27861 30263 32473 32803 32434 29674 34467 34778 36991

Outbound Monthly 34601 31246 32453 33131 31889 30409 33023 31986 32225 32993 34715 44774 42435 39631 44893 38696 40623

Tot / Working day 2119 1981 2195 2185 2312 1985 2176 2060 2146 2343 2488 2873 2674 2475 3052 2624 2772

Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10

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YTD May 2010 VS YTD May 2009 Export Express increased by 56.0% from 6521 shpts to 10,202 shpts

Heavies Above 500 Kgs - Export Express

Data Source: SATS & Menzies

1210

1158

1298

1380

1475

1452

1574

1368

1434

1992

1754

2170

1717

1782

2006

2380

2317

40 3943 46 49 48

5246 48

6658

72

57 5967

79 77

700

900

1100

1300

1500

1700

1900

2100

2300

2500

Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-100

10

20

30

40

50

60

70

80

90

Export Express Avg / Day

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Data source : SATS and Menzies

Dwell time performance

3.54

4.16

3.39

3.86

4.334.2

3.24 3.213.32 3.27 3.24 3.22

3.47

3.773.56

3.153.3

3.75

4.9

2.0

2.5

3.0

3.5

4.0

4.5

5.0

BLR TARGET = 3.80

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The Land side user concept

There are 3 Check In bays in the check in area which consists of 53 counters and 1 supervisor counter. Passengers check in for domestic and international flights based on the counters that are allotted by the schedule

Demand based on Flight Schedule – The user concept is based on the flight schedule - Airline with the maximum number of frequencies at a particular time will get the maximum no of counters for that particular time period.

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Air Traffic Movement during a typical Week

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• Total Movements / Week - 3100

• Average Movements / Day - 443

• Max Movements / Day 4 - 454

• Min Movements / Day 3 - 437

Air Traffic Movement

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16 years to kick start - Political leaders kept vacillating

Exhaustive “competitive” bidding process followed to select the operator. But the criteria followed was revenue sharing with government and not the user charges. The concessionaire has agreed to pay 4% of its gross annual revenues to government

Analysis - Some Pointers

Cost over run by (more than double) at the completion of construction

BIAL trying to recoup the investments by effecting phenomenal increase in the user charges. It proposed INR 1070 for international passengers and INR 675 for domestic passengers. Government agreed for international proposal but allowed only INR 260 from domestic passengers.

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Passenger terminal capacity vis a vis total airport land is way below as compared to other Airports in the world – Excess of 1085 acres over Heathrow

The Major Concerns

Particular SingaporeChangi

HonkongInternational

London Heathrow

BangloreDevanhalli

Area (Acre)

3212 3101 2965 4050

Capacity in 2007(Million)

70 87 NA 10

Traffic in 2007(Million)

37 48 68 Opened in 2008

No. of runways 2 2 2 1 (To be expanded)

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Forecasts gone awry resulting in airport almost overgrowing its capacity (10 Million) in three years

The Major Concerns

Closure of existing HAL Airport

MHE’s and Aerobridges are not good enough to reduce dwell time

Charges of hidden subsidies in the form of interest free loan of 350 crore, exemption on taxes and duties.

Sale of full 17 % ownership by L&T to GVK at INR 686 crore and 12 % stake by Unique Zurich at 485 crore.

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The Major Concerns

During January, 2010 your company has acquired 29% equity stake in Bangalore International Airport Limited (BIAL) through another wholly owned subsidiary. BIAL is the 4th largest Airport in India in terms of passenger traffic having promising potential to grow in future. Bengaluru is one of the fastest growing air traffic hubs in the country with a potential to emerge as among the top three hubs ahead of the other key metro cities. Acquisition of BIAL shares will serve the Company's strategic business objective of airport business in India. It will also give headway to GVK to have its presence in Southern India, a fast expanding aviation market.

Source - Annual report GVK

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• Whilst BIAL resulted in creation of industry first by becoming first PPP to be signed for an Airport project in India, It came with the challenge of no precedence or template of how to build an airport in the country

• The project was initiated in information vacuum scenario

• Finally a world class airport was created after two decades (conception in 1991) of wading through the purling stream

• It took 3 years for BIAL and KSIIDC to negotiate model concession agreement with civil aviation ministry

• It helped HIAL also to shorten their airport project cycle by almost two years

• There has to be an upside for any project to come from the conception to the execution stage and BIAL had many

• It indeed set the ball rolling for other major airport projects in the country like DIAL and MIAL

• To achieve IATA rating of 3.5

Indirect contributions of BIAL

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Export Conveyor Containerization- Ball Deck

Bagging Area Build-up Area

Page 37Airline Handover Area Containerization

Export SlidesProcessing Area

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Indian airports have traditionally adopted demand chase model

Capacity augmentation should be pro-active not reactive

Conclusion

Aeronautical charges regulated by AAI forcing BIAL to turn to Non-Aero

End user pricing should also be one of the bid evaluation criterion alongside revenue sharing for Airport privatization projects

Open competitive bidding with reasonable caps on end user price would create a win-win situation for the Govt, the Concessionaire and the end user

Create new infrastructure but sweat the existing assets – HAL closure

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A Walk Through…A Walk Through… BIAL AIRPORT TerminalBIAL AIRPORT Terminal

BangaloreBangalore

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Cargo Terminal

Haj Terminal

City Side t Air Side

Cargo and Passenger Handling UnitsCargo and Passenger Handling Units

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Menzies TerminalMenzies Terminal

Vacant LandVacant Land

Cargo Handling Unit Cargo Handling Unit

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View From City SideView From City Side

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Cargo Terminal

Haj Terminal

Import Shipment Flow Aerial View

Warehouse Staff

Inbound Bond areaImport Sort areaImport 2 Tier conveyor

Ball Deck

Import Break Bulk Customs Examination Area

Inbound SlideInbound Flyer Sort Area

Cage Trolleys

Heavy racks

Import X ray

Heavy racks

Page 44View from Air SideView from Air Side

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