2-airport theory

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arnab mukherjee

Oct 7, 2022, 6:42:36 PM10/7/22

Metro, expressway, hi-speed rail; India's most connected Noida's Jewar airport to test 2-airport theory

Doubts about Jewar’s viability in the short run persist despite grand connectivity plans.

By ANJULI BHARGAVA,  Oct 7, 2022 12 min read
Metro, expressway, hi-speed rail; India's most connected Noida's Jewar airport to test 2-airport theory
Artistic impression of Noida's International airport also known as Jewar airport

Connections can make or break. Perhaps nowhere does that hold truer than for an upcoming airport. It is with this in mind that Uttar Pradesh’s (UP) new airport at Jewar - which will compete with Delhi’s existing airport Delhi International Airport Limited (DIAL) - is being designed.

By the end of 2024, as Noida International Airport Limited (NIAL), a 100% subsidiary of Zurich Airport International incorporated in 2019 to develop the greenfield facility, gets ready for its first flight, passengers looking to fly in and out of the national capital region (NCR) will be spoilt for choice in more ways than one. Not only will many of them have the option of which airport if everything goes as planned, but there will also be many ways of reaching what is gearing up to be India’s best-connected airport in the near future.

In the first phase and at a cost of ₹5,730 crore, the new airport with a single runway and the terminal building is expected to cater to 12 million passengers per annum. A second runway and terminal are proposed once the traffic touches 50 million. Over the next 40 years, traffic is expected to touch 70 million. 65% of the first tranche of funding is coming from the State Bank of India (SBI) and the rest will be funded by Zurich Airports International. In June, the contract to build the facility was recently awarded to Tata Projects.

It Takes Many Hands To Clap

An idea first mooted in 2001, Jewar remained on paper for a bit but was moved around to alternate sites in the state by subsequent governments before being frozen in 2014. Till a few years ago, the area was mostly a sleepy little hamlet with a smattering of temples including a roughly 25-foot Hanuman statue, a burial ground and some local houses, not remarkably different from the thousands of Indian villages one encounters all over the country.

In 2017, however, things began to gather pace. The state government acquired and got the land vacated despite minor hiccups. By the end of November 2019, Zurich International Airport won the bid to build and operate the new airport for 40 years, with a further right of first refusal for 30 years.

Government sources claim that the new airport is a “priority” for the present BJP-led government at the centre and Yogi Adityanath in UP. This is in part due to the unhappy experience with Navi Mumbai International Airport (NMIA), and delays in construction which have cost the Indian economy dearly.

All Roads To Lead To Jewar

Easing access is perhaps the most critical aspect for success and the UP government and NIAL are going out on a limb to ensure that it happens. Many plans are afoot, some of which are likely to happen quickly.

To begin with, the new airport is 700 meters from the Yamuna expressway, which has already redefined travel time in this region. To ensure smoother access to the new airport, the National Highway Authority of India (NHAI) is working on a short interchange from the site to the expressway. In addition, the Delhi metro is exploring an extension line from Noida and Greater Noida and it is expected to have a station that opens almost opposite the entrance of the new facility - similar to many European airports - making it more readily accessible from all metro spots in and around the national capital region (NCR). It is primarily the Delhi metro that will also link the two competing airports, Delhi and Jewar.

An independent high-speed access to the airport from the East is also on the cards. This will also allow the airport authorities to separate the cargo, technical, and maintenance traffic from the passenger side, making it more efficient for both stakeholders. Lastly, a more ambitious high-speed rail connection between Delhi and Varanasi with a stop at the Jewar passenger terminal building is also on the cards although few expect it to be ready in a hurry.

Indian Warmth, Swiss Efficiency

In terms of design and efficiency, expectations from NIAL are already sky-high among stakeholders. Flughafen Zurich has of late been in global news for having picked sustainable wood to build one of the world’s largest airport docks at Zurich Airport.

At Jewar, Tata Projects recently beat Larsen and Toubro and Shapoorjee Pallonjee to win the mandate for construction of the first phase of the new airport, which is expected to be a combination of “Indian warmth and hospitality with Swiss efficiency” (see interview : Christoph Schnellman).

Besides being a complex engineering construction project, the new airport will be a net zero carbon emission facility, which is touted to be a first among Indian airports. The water used will not enter the sewage system but will be treated and reused. Similarly, all waste generated will be sorted, recycled, and repurposed. A waste generation and biogas plant will be housed on the premises. Tata Projects executive vice president Ravishankar Chandrasekaran says that “culture, climate and context” will shape and guide the design of the facility, which will be the Tata group’s maiden project in the airport sector on this scale.

Airlines Say Yay As Delhi Forced to Pull up Socks

The pandemic provided a sort of hiatus in India’s aviation growth numbers and this reduced the pressure on Delhi, which was already beginning to face constraints. Airlines had already begun to find it hard to get space and slots at the timings they wanted and say they were facing both airside and terminal side constraints. COVID however has lent a breather but Delhi continues to remain choc-a-bloc.

DIAL itself is gearing up to retain its traffic and investing ₹9,800 crore to expand and upgrade its present facilities to allow for 100 million yearly passengers. The existing terminals from which the low-fare airlines operate are being upgraded and a fourth runway is expected to be operational by this summer. The Ministry of Civil Aviation (MOCA) sources say that it is possible the airport may offer larger players like Tata or IndiGo their own exclusive terminal in due course.

A senior IndiGo official argues that the coming up of Jewar was good news all around since an attitude of “take it or leave it" had crept into DIAL and he expects Jewar to fix this. Besides its own catchment area of Noida, Greater Noida, Agra, Mathura and nearby region, he argues DIAL cannot avoid some loss of traffic from central and west Delhi and Noida as passengers pick their best option in terms of time saved and cost.

Airline sources further say that such competition would be welcome in all metro cities as it would tend to reduce the monopolistic tendencies that creep in when there is only one facility. “A bit of competition never hurts. By the time Jewar is ready for take-off, we will have some prior experience with a two-airport system thanks to Goa’s MOPA airport which will be up and running well before”, says the CEO of one of the airlines. He argues that they - the airlines - operate in a severely competitive environment and there’s no reason why airports shouldn’t too. The competition will benefit everyone, argue the carriers’ top managers, including the existing airport players who tend to be quite complacent in their present situations.

Catch 22

Although the pandemic delayed the airport plans by six months or so, officials involved with the project say that they expect to make up for lost time and the airport should be ready as per the target: October-December 2024.

But experts, analysts, and aviation insiders say that the biggest question mark over Jewar is its viability. Most are of the view that Zurich and the Jewar facility will burn cash for the first six to eight years before it starts making any returns. There are good reasons for this scepticism.

The airport is likely to be far more expensive to operate since it is being built so much later than DIAL and the construction cost will be in keeping with today’s input costs and prices. Although the plan is to make sure there is no “gold plating” and that the airport is built in phases and fit for purpose, even then the costs of operation from Jewar are likely to be substantially higher for airlines and other stakeholders. “Delhi has already attained a certain scale so the economies of scale have kicked in already”, says a former senior finance head of DIAL.

But if the new airport is likely to be costlier, so will reaching it. Although Jewar will have its own catchment area, it remains almost 25-26 kilometres from the heart of Noida. Aviation industry insiders say that time and cost will determine who chooses to fly from where. “Some fliers are driven almost entirely by the cost and some almost entirely by time and this is likely to determine who chooses which airport”, says a senior MOCA official.

What remains a moot point is how far the new facility will be able to attract existing fliers, especially from the south and west Delhi. “Once you reach the Yamuna Expressway, access may become very fast but reaching the expressway means navigating many parts of clogged Delhi traffic,” says Harsh Puri, a resident of Patparganj. 

Currently, with the unpredictability of traffic the way it is and depending on timings, he says he sets out almost one and half hours earlier to reach Delhi airport although it often takes far less time to actually reach.

Kirti Seth, CEO of Nasscomm’s Sector Skill Council, a resident of Noida and a frequent flier, says she would choose anything over T2 but eventually, prices and timings will determine her decision on the choice of the airport if she has one. “All things being equal, Jewar would be a preferred choice for me as it would mean I can avoid going through Delhi”, she adds.

Seth uses a key phrase: "All things being equal." Just as passengers will be guided by how much it costs to reach and access the new facility, airlines are likely to be guided by how much it costs for them to operate from it. Here, there is a silver lining that airlines seem to have already spotted. Sources say that there is a ten-year moratorium on payment of any fees to the UP government that NIAL enjoys as part of its concession agreement. This, the carriers feel, will allow it to bear some of the higher costs. A senior IndiGo management source says that he expects charges for airlines - landing, parking and all other facilities - to be on a par with DIAL, as Jewar seeks to attract more airlines to operate from it, which is inevitable. He says that he expects anywhere between 20%-25% of the existing frequencies across airlines from Mumbai or Bangalore to Delhi to move to Jewar, as and when it’s operational.

But government officials say that even if Jewar is a bit early in terms of traffic requirements of the NCR region and the UP government or the concessionaire loses money for a while, it is better to be early than sorry as has been the case with Mumbai. There is a general consensus that inordinate delays in getting NMIA off the ground have already taken a heavy toll on Mumbai’s aviation growth. Slots in Mumbai are not available even at a premium and airlines routinely burn fuel waiting to land and take off. “Although nobody is able to put a specific number to it, we are well aware that the delay in getting NMIA going has cost the Indian economy dearly. We don’t want to see a repeat of this in the capital”, says a top government source.

In a country of India’s diversity and complexity, greenfield airports like NMIA or even MOPA have taken almost 20 years since they were first conceived. “India no longer has twenty years to while away. The opportunity cost of not acting in time is too high for the country”, he adds. Whether Jewar will pave the way for a two-airport system to develop across all of India’s major cities, is still early to say but a start is being made with the seat of government.

Interview with Christoph Schnellman, CEO of Tata Projects

By December 2024, the new international airport at Jewar near Greater Noida expects to kick off with a passenger handling capacity of 12 million. Noida International Airport Limited (NIAL) is a 100% subsidiary of Flughafen Zurich AG (owner and operator of Zurich Airport) incorporated to develop the greenfield facility. The company will be responsible for implementing the PPP (Public Private Partnership) project together with the Government of Uttar Pradesh.

CEO Christoph Schnellman, who was closely involved with the development of Bangalore International Airport Limited (BIAL) and is now leading NIAL spoke to Anjuli Bhargava about the airport’s plans and challenges. Excerpts :

Why do we hear a constant refrain that private Indian airports are among the most expensive? And how can Jewar avoid this?

Airport charges comprise only around 7% to 8% of the costs of airlines in India. So, I don’t think I agree with this assertion to begin with.

Moreover, India’s airport privatisation programme has been a big success and has been in part responsible for the high growth we have seen in the overall aviation sector. Had it not happened, this growth may not have been possible or certainly not to this extent.

Having said that, airlines and other stakeholders in the sector are always under pressure to bring down costs and this is true globally. No matter which part of the industry one represents, there is a constant challenge to reduce costs and offer competitive prices to fliers. It’s a constant battle we all need to fight. At Jewar, we are designing with this in mind. The facility will be easy to use, cost-efficient and fit for purpose, without any “gold plating” and with no extravagant use of materials that are not strictly required. Expansions will closely mirror traffic growth.

Our design will support quick turnarounds and transfers in a manner that allows airlines to maximize air time. To cite an instance we will have boarding bridges and gates that allow mixed rotations so international flights come in and depart domestically as smoothly as possible with quick and easy segregation of passengers. To achieve this we have to make investments at this point but the overall benefits will eventually outweigh the costs. We are also working closely with the UP government to create a more conducive operating environment for business and one of the recent measures to this end has been to reduce the tax on ATF to 1%. 

In the past, many have argued that it has been less than up to the task it has been entrusted with and there are many battles in courts with the airports. How can the working of the regulatory body Airport Economic Regulatory Authority (AERA) be improved? 

In 2008, when we first came to India, AERA didn’t exist. This regulation and the authority have developed over time since and in my view the authority is now quite robust, transparent. and reasonably predictable, all important factors for private capital to come into this or practically any sector.

We do business in Zurich, we own assets in Latin America, primarily Brazil and we find India on par. It is robust enough to give us confidence as long-term investors. Perhaps the only area is that the regulatory environment didn’t anticipate an event like the CORONA crisis - traffic grinding to a halt, a massive drop in revenue, and so on - and in the future, such a crisis might need to be factored in. Not everyone has been happy with the outcomes and the fallout of this crisis but it was not something anyone anticipated. How we deal in the future with a crisis of this magnitude at a regulatory level might be something all regulatory bodies need to consider and factor in.

Will the airport be more expensive for airlines to operate from due to sustainability measures and the net zero emissions goal? Are such measures likely to translate into higher costs?

We are committed to de-carbonisation and will operate the airport on a net zero emissions basis. We have carefully assessed the energy requirements and have put in place a plan to make it carbon-neutral. A lot of work has been done on the design side and the use of passive measures. We will be conserving energy as far as possible in ventilation and by using natural lighting. We will be maximizing the use of solar power. Our experience from Zurich and other airports is that the use of sustainable energy, in the long run, is more cost-effective than the use of conventional power.

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