KOCHI: The Cochin International Airport Ltd (CIAL), which is celebrating its silver jubilee year, is staring at stagnancy and possible degrowth as not enough attention is being paid to its expansion and development.
Instead, insiders and fliers say, the company is diverting the huge user development fees (UDF) it is collecting from passengers to cater to its ultra-rich customers even as a bulk of its profits are doled out to its big shareholders as dividends sacrificing future potential.
The result: the airport's immediate expansion projects such as the new international terminal and cargo complex are moving at a snail's pace while there seems to be no concrete plan to construct the second runway, which is a must given the robust growth in the Indian aviation sector.
The biggest issue that has riled the passengers is the user development fees, which the CIAL imposed from 2022-23. The domestic fliers are charged Rs 270/passenger as UDF while overseas travellers are charged Rs 670/ticket.
The user fees have helped the CIAL to report buoyant growth in its profits. Consider this: the user development fee, which contributed Rs 114.59 crore to CIAL's profits in the year ended March 31, 2023, increased to Rs 189.78 crore in 2023-24. The airport's net profit for 2023-24 was Rs 412.58 crore. In other words, UDF contributed to nearly 46% of its bottomline.
"Instead of improving the facilities for the ordinary passengers from the money collected, CIAL was spending the money on its golf course, building a 5-star hotel and establishing a new business jet terminal," said a source. "The business jet terminal, built with an investment of Rs 30 crore, is meant only for a handful of billionaires,” he alleged.
Last year, the CIAL gave out a dividend of 35% and this year the proposal is to increase it further to 45-50%. This would mean that nearly Rs 206 crore of its profits of Rs 412 crore will go out as dividend.
"This is unsustainable. You need to build reserves to fund your future plans, like land acquisition for building the second runway," pointed out a board member.
Speaking at TNIE's Express Dialogues programme recently, V J Kurian, CIAL's former managing director, stressed the importance of building a secondary runway.
"The 2012 recarpeting highlighted the need for a secondary runway to avoid future closures. Buying 300-350 acres of land in the next two years and planning for a secondary runway is essential. This will avoid disruptions during the next recarpeting in 2028. Unfortunately, the focus is on short-term gains and dividends, rather than long-term development. The PPP model's limitation is that stakeholders prioritise personal gains over project development," Kurian had said.
Insiders point out that the main problem of CIAL is that it does not have a professionally-run board of directors. “The entire board is filled with big shareholders. Their interest is to get the maximum dividend and there's no vision for the future," said a board member. Biji Eapen, president of Airline Users Rights and Grievances Redressal Forum, said CIAL was ripping off the passengers to suit the interest of a few big investors.
"There's no way we can justify the imposition of the user development fee when all that the Cochin Airport is doing is to improve the facilities for the ultra-rich class," he said.
The Forum has convened a meeting on Thursday to chalk out a plan of action to bring this to the attention of the lawmakers. "On the one hand, the chief minister is writing to the aviation minister on the sky-high rates charged by the airline companies, while on the other the government is doing nothing to stop this day-light robbery through the user development fees," said Biji. "There's no justification for establishing an exclusive business jet terminal when the priority is the ordinary fliers," he said.
When contacted, the CIAL spokesman justified the UDF saying a lot of facilities were being implemented at the airport, including scanners, and DigiYatra.
"Further, the UDF is approved by the Airports Economic Regulatory Authority of India (AERA), which fixes the tariffs. We cannot unilaterally impose tariffs," he explained.
A source point out CIAL is under the clutches of the big Gulf carriers. "If you notice, there are no direct flights from Kochi to mainland Europe and the US, with the exception of an Air India flight to London.
"The passengers are at the mercy of the Gulf carriers, and they are paying through their nose for tickets. A passenger choosing to fly to mainland Europe from Bengaluru will save a huge amount as compared to those flying from Kochi to the same destination. Similarly, fliers from Delhi to Atlanta will save a lot of money as compared to those flying from Kochi because of the transit in the Gulf," explained the source.
All other airports, especially the big six – Delhi, Mumbai, Bengaluru, Chennai, Kolkata and Hyderabad – are on a fast expansion spree. "Even Trivandrum, after Adani's acquisition, will overcome the teething troubles to overtake Cochin airport. It's time the state government, the biggest stakeholder in the airport, get its priorities right," said the board member.
According to the board member, the Indian aviation sector is expected to grow at a faster rate in coming years, and if Kochi airport fails to cash in on the demand, it will be outrun by others.