GHIAL's plans hit air-pocket

HYDERABAD: The expansion plans of GMR Hyderabad International Airport (GHIAL) have hit an air-pocket. The global economic slow-down and
credit crunch have forced the company to defer the over Rs 150-crore capital expenditure on the new airport and slow down development of real-estate development and special economic zones. An austerity drive is on to trim operating costs.

The current crisis could pull-down revenues as passenger traffic is expected to drop by a million. “We expect passenger traffic to touch 7.3 million this fiscal compared to the original forecast of 8.4 million,” said P S Nair, chief executive officer, GHIAL. This, in turn, would delay the break-even from 6 to 6.5 years.

Domestic and international passenger traffic dropped by a near 10% drop from April to October this year compared to the same period last year. The story was much the same for domestic cargo. But the silver-lining was the 46% growth in international cargo traffic, thanks to higher exports and project imports.

GHIAL has targeted an initial passenger capacity of 12 million. The drop in passenger traffic is a cause for worry, though it mirrors the global trend. Loss making airline companies in India have been provided some relief, with the government cutting jet fuel prices and exempting customs duty on jet fuel.

Nair reckons that airport operators such as GHIAL also have a legitimate right and case to seek government help to tide over the crisis. The operator already has a state-support agreement on a slew of fiscal incentives including refund of value added tax. However, it is too early to take a call on reviewing the concession agreement, he said.

To shore up revenues, GHIAL plans to seek a hike in the user development charges for domestic passengers from Rs 375 per passenger to Rs 600 per passenger. “Our initial business projections and break-even period were based a UDF charge of Rs 600 per passenger. We will approach the Airport Economic Regulatory Authority (AERA) with our case, once it is set up,” said Vishwanath Attaluri, chief commercial officer, GHIAL.

The company also plans to step up marketing efforts for cargo and international airlines and routes and increase the spread on duty free, retail and food and beverages for passengers to fight slow down.

“Our target is to increase the share of non-aero revenues from 40% to 60% in due course, in sync with international trends,” said Peter W Noyce, chief operating officer, GHIAL. GHIAL is a joint venture between the GMR Group, Malaysia Airports Holdings Berhad, the state government and the centre. The GMR group has a majority 63% stake, while MAHB holds 11%. The state government and Airports Authority of India (AAI) hold a 13% stake each in the project.