Bloomberg News

Asia’s Second Biggest Slum Hurts Mumbai Airport Expansion

September 12, 2013

Air India Aircraft

An Air India Ltd. aircraft prepares to land at Chhatrapati Shivaji International Airport in Mumbai. Photographer: Dhiraj Singh/Bloomberg

India’s airlines are desperate to get space in Mumbai as travel demand surges. Standing between the carriers and their growth plans are a million people living in slums around the airport.

Years of efforts to clear the tin-roofed shanties that surround the aerodrome in India’s financial capital hit a road block when a company tasked with the job had its project terminated, prompting a court battle. A more than decade-old plan to build a second airport in the city that’s home to billionaires such as Mukesh Ambani, has also gone nowhere. India ranked below Ethiopia and Namibia in the World Economic Forum’s 2012 score for quality of air transport infrastructure.

Lack of airport facilities prompted Prime Minister Manmohan Singh to set a January deadline to start work on Mumbai’s new airfield as he struggles to attract overseas investment and revive growth in Asia’s third-largest economy. Delays and congestion at Mumbai airport may worsen as Boeing Co. (BA:US) and Airbus SAS forecast India will buy about $175 billion of aircraft through the next two decades to meet rising travel demand.

“Mumbai immediately needs to do something to ease the congestion at its airport,” said Amber Dubey, a Gurgaon, India-based partner at KPMG. “Else the city may choke.”

Passenger numbers at Mumbai International Airport Ltd., controlled by GVK Power & Infrastructure Ltd. (GVKP), jumped 17 percent to 30 million in the 12 months ended in March from five years ago, as entry of budget carriers such as IndiGo spurred more Indians to choose airlines for long-distance travel. Out of 7,598 departures in July, 28 percent were delayed for reasons that included airport and air traffic control facilities.

Relocate Squatters

Almost a sixth of Mumbai airport’s 802 hectares (1,982 acres) of land is occupied by slums. The airport is working on a plan to relocate squatters from 65,000 shanties as part of an upgrade that started in 2006, the operator said in a 2012 report.

Mumbai Airport has served a notice of termination to develop the area to Housing Development & Infrastructure Ltd. (HDIL), the builder said in a stock exchange filing on May 29. The company known as HDIL has initiated legal action against the cancellation, according to the filing. Constraints related to land are affecting expansion of the facility, Civil Aviation Minister Ajit Singh said Sept. 10.

Vaibhav Tiwari, a spokesman at Mumbai International Airport, didn’t immediately respond to e-mailed questions, two calls and a text message to his mobile phone. HDIL didn’t respond to e-mailed questions.

Airfield Capacity

Some of India’s other main cities have already upgraded their airports. In 2010, New Delhi opened its new terminal -- built in 37 months -- that helped more than double the airfield capacity to 60 million passengers a year.

In February, the facility, controlled by GMR Infrastructure Ltd. (GMRI), handled 76 flight movements in an hour, using three runways simultaneously. Bangalore and Hyderabad in south India also opened new airports in 2008.

Mumbai airport handles 38 aircraft movements per hour using a single runway, compared with London Gatwick’s 53 with a similar airstrip. GVK plans to boost flight movements per hour to 48 in future, the operator said in the report without giving details. The Secunderabad, India-based company is spending 98 billion rupees ($1.5 billion) on a new one-roof terminal that can handle 40 million passengers a year.

Airlines’ Costs

“We are encouraging airlines to park in cities such as Aurangabad” near Mumbai and offering carriers incentives like free landing and night parking, said V.P. Agrawal, chairman of state-owned Airports Authority of India that owns 26 percent of the Mumbai airport operator.

The number of airline travelers passing through Mumbai may increase to 119 million by 2031, according to the City and Industrial Development Corp. of Maharashtra, the state-owned company that’s overseeing work on the 146 billion-rupee second airport project. It is yet to acquire from private owners 24 percent of the land required for the facility.

Lack of adequate infrastructure at airfields including Mumbai has pushed up costs for airlines such as Jet Airways (India) Ltd. (JETIN) as they contend with the region’s highest fuel costs, a weak rupee and slowing economic growth.

Jet hasn’t made a profit in six years, while SpiceJet Ltd. (SJET) posted losses for a second straight year in the period ended March 31. Liquor baron Vijay Mallya’s Kingfisher Airlines Ltd. (KAIR) has grounded its planes for about a year.

Parking Slots

Inadequate facilities threaten plans to boost flights from the city, according to Go Airlines (India) Pvt., a Mumbai-based budget carrier with 72 Airbus A320neos on order. Mumbai needs additional capacity, said Go Air Chief Executive Officer Giorgio De Roni in an interview.

“Certainly, with the growth of the fleet, we’ll face challenges,” De Roni said. “We also must acknowledge there’s an infrastructure problem.”

Availability of aircraft parking slots may improve after Mumbai opens a new airport terminal at the existing site, Anil Srivastava, joint secretary in the ministry of civil aviation, said in a Sept. 5 interview. Capacity is also constrained because of the single runway operations, he said.

Mumbai Airport plans to open the one-roof terminal in 2014. Even after the third and final phase of work to develop the existing airport is completed in 2020, the facility will struggle to handle more flights as it has only an intersecting runway and one taxiway, according to a report by the nation’s airport tariff regulator.

Attracting Capital

Limited availability of land, especially for runway and aircraft parking, challenges the development of Mumbai’s existing airport, the operator said in the 2012 report. The airport discarded a 2006 plan for a parallel runway, citing difficulty in relocating people from the adjoining slum and the expenses involved.

Attracting private capital to airports is key to Prime Minister Singh’s goal of spending $1 trillion on roads, ports, and other infrastructure by 2017 to boost growth. Concerns over inflation and lack of investments prompted Standard Chartered Plc last month to cut India’s growth forecast to 4.7 percent from 5.5 percent in the year ending March 31.

The Jan. 31 deadline to start work on the new Mumbai airport, planned since 1997, is the second in as many years.

When completed, the facility will have twin runways and a capacity to handle 60 million passengers a year. GVK has the right of first refusal to build it, under the terms of a deal signed when it took over the existing airfield in 2006.

The new facility is unlikely to come up before 2018, said Binit Somaia, a Sydney-based director at CAPA Centre for Aviation that advises airlines.

“This means that traffic will be choked off, reducing business traffic and tourist arrivals,” Somaia said. The delay will also cause “an economic loss running into billions of dollars for the city, the state and the Indian economy.”

To contact the reporter on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net


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