Observations, deductions and feelings fueled by tequila, tea and tobacco

new airport old cribs

In Economics, Management & Leadership, Observations, Deductions and Feelings on February 26, 2008 at 15:28

Everyone who knows how to spell the word airport is busy writing (moreso cribbing) about the new airports at Bangalore and Hyderabad. I’ve got no problem with that.

My problem is with all the morons who seem to suggest (specially wrt B-lore) that the old airport should be allowed to function, specially for low cost carriers. Well well. My issue here is not with letting the old airport continue, but how and for whom. My opinion:

Let the HAL airport continue, specifically (if not exclusively) for the full service carriers. And charge all passengers the ‘extortionist’ UDF1 that is proposed to be charged at the new airport. However, all of this UDF collected should be passed on to BIAL with the PSF2 being shared between HAL and BIAL. Idea behind this is clear – the full service carrier would have easier connectivity to the citycentre with lesser time wasted in commuting. Also, they would be charging their customers more and providing a tangible differentiator for that.

The LCCs would be based out of the new airports but would have a substantially lower UDF (say 25% of the HAL airport). These airlines would get the benefit of lower costs which can be reflected in prices. However, passengers flying them would have to suffer longer commutes!

For BIAL, though it would be a potential loss (thanks to reduced UDF for LCCs), it can be offset by a revenue sharing agreement with HAL. For HAL, they may play hardball (from habit of being a PSU) but in reality even a revenue share would be more lucrative an option for them than the other (dismal) opportunities they seem to be looking at (MRO, et al).

Of course, this (or the classic approach suggested by others) would lead to major dis-synergies for FSC-LCC groups like Jet-Jetlite and Kingfisher-Deccan who’d require double the infrastructure for both airports. But then if the additional pricing power (for FSC partner) allows them to recover it, why not?

This seems to me more like a market oriented approach than the classic solution of simply allocating ‘old’ but much more accessible airport to LCCs and the new but more distant airport to the more paying FSCs!

1UDF: User Development Fee to be charged to all passengers departing / transiting through an airport. It ‘would’ help the airport developed recover their investments
2PSF: Passenger Service Fee is charged by the government to cover CISF (Security) and AAI/ATC (Airport Management) expenses and passed on as such.


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