Options for flights from HAL airport in addition to BIAL

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Earlier this week, under directions of High Court of Karnataka, the Ministry of Civil Aviation held discussions with Bengaluru International Airport Limited (BIAL) consortium about the high User Development Fee (UDF), and on keeping the existing HAL airport open in parallel with the new Bengaluru International Airport (BIA).

On sites like Citizen Matters and Praja, many Bangaloreans are voicing concern on the details of how traffic should be split. I summarise a few options for consideration :

1. Government Option.
Reserve HAL for flights under 1 hour, using aircraft under 80 seat capacity.

Benefits :

1. Regional flights of short duration are from “in-city”.
2. Relieves congestion at BIA allowing more profitable larger flights taking up the slots. i.e. minimal financial impact.

Cons :

1. Only 3 airlines benefit (Kingfisher/Deccan, Jet, Paramount).
2. The Airlines Operating Committee (AOC) opposes any move that offer selectively benefits only to a few airlines. So we are unclear on the response of airlines.
3. Limited commercial benefit to BIAL.
4. Not all regional flights covered, i.e. Goa, Chennai, Hyderabad which is operated by B737/A320 i.e. aircraft greater than 80 passengers).
5. Forces arbitrary division and inconvenience to passengers from West and North Bangalore.

2. RK Misra Option
Split traffic traffic between HAL and BIAL to 30%-70%. Allow any airline to fly any domestic route from HAL up to 30% of its capacity ex-BIA.

Benefits :

1. Simple to implement
2. Gives airport users (passengers and airlines) choice.

Cons :

1. No commercial benefit for BIA ? Doubtful that BIAL will accept.
2. Long term capacity of HAL airport ? Will need to expanded. Is government willing to invest ?
3. Inequitable to smaller airlines with limited flights from Bangalore.

3. My proposal
Let market forces prevail :

• Limit HAL to 3 million passengers annually as a start. Capacity increase to be reviewed annually.
• Any airline can bid for a slot ex HAL for any domestic sector. A reserve price can be kept for each slot.
• The airline bid amount is given to BIAL as commercial benefit
• The airline can choose to recover the bid amount by charging a higher airfare ex-HAL, for the passengers’ “convenience”
• Passengers decide if the price vs. convenience matches up and via market forces airlines will determine what their flights ex-HAL are worth.

Benefits :

1. Completely market driven and most equitable to all parties
2. Commercial benefit to BIAL
3. Affords benefits and choice to the two main users of an airport – airlines and passengers
4. Will develop two separate airport networks for long term sustainability
5. Market forces Will be an accurate determinant of users’ needs and price points.

Cons :

1. Potential for abuse by “richer” airlines
2. Uncertain financial impact on BIAL i.e. loss of revenue vs. income from the bids
3. Bid amount is uncertain

4. My radical proposal

• The current terminal at HAL is owned and operated by Airports Authority of India (AAI), which is a shareholder in BIAL.
• Give BIAL the operational responsibility of the terminal, or possibly, AAI sells it to BIAL, with the understanding that BIAL has to run the terminal without UDF, or cap UDF to a small amount say Rs. 200 for next 3 years, and then make the UDF indexed to inflation.
• Let BIAL decide the division in conjunction with airlines and industry groups.
• Airside operations remains with HAL.
• AAI being a shareholder of BIAL will continue to get commercial benefits.
• The big hurdle here will be BIAL. Why should they take on the headache with small returns ? The big benefit is that BIAL gets access to “instant expansion” without need of investment.

Please do post your comments.