Kochi's private airport set to break even

Cochin International Airport Ltd, the first airport in the country to be privatised, can serve as a model for the privatisation of the Delhi and Mumbai airports.

After facing innumerable problems since its incorporation almost 10 years ago, CIAL is expecting to break even this year and is poised for a marginal net profit.

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CIAL was set up as a public limited company in March 30, 1994, with an authorised capital of Rs 90 crore (Rs 900 million). After overcoming various hurdles during its construction, the airport started commercial operations on June 10, 1999.

In 2002-03, CIAL registered an operating profit of Rs 6.92 crore (Rs 69.2 million), against a loss of Rs 18.01 crore (Rs 180.1 million) in 2001-02.

According to a CIAL executive, currently the company's revenues are not enough to meet its debts. Its operating cost is Rs 2.5 crore (Rs 25 million) a month, and it has been spending Rs 3 crore (Rs 30 billion) every month towards repayment of loans.

However, he said, "The company is now saving about Rs 68 crore (Rs 680 million) by replacing high-cost loans with low-cost ones."

CIAL is also planning a rights issue to reduce its debt. UTI Bank will be advising the airport on restructuring its equity.

The executive said the airport was looking at increasing revenue by starting more international flights, using land for commercial purposes, divesting equity and setting up more duty-free shops.

Attributing CIAL's precarious financial position to the government's policies, the executive said, "Though many international airlines have been seeking permission to land at Kochi, they are not being allowed to do so. CIAL has been pressing for more flights and charters."

For example, though Saudi Airlines and Turkmenistan Airlines had been seeking permission to start operations to Kochi for the last three years, the civil aviation ministry initially allowed them to only carry Haj pilgrims.

Six months ago, Saudi Airlines was allowed to commence commercial operations to Kochi.

Similarly, Emirates, was allowed to start operations a year ago. Now its request to raise the frequency of its flights is awaiting approval by the civil aviation ministry.

Last year, CIAL handled 800,000 passengers, which is half its traffic-handling capacity. At present, CIAL gets about 112 flights a week, though it can handle 160-170.

Before CIAL was incorporated, the domestic airport at Kochi was owned by the Navy and it could handle operations of only narrow-bodied aircraft.

So an airport of international standards for operating regular domestic and international flights became necessary.

However, the Airports Authority of India and the central government did not have sufficient funds for investment in a new airport. Therefore, private participation became essential.

The airport was set up with equity participation from airport users, mainly non-resident Indians, the Kerala government and airport service providers. More than 11,000 individual investors from 30 countries subscribed to the equity share capital of CIAL.

The state government holds the majority stake of 26 per cent in the airport. The chief minister is the chairman and the state power minister is the vice-chairman of the company.

Though the state government had initially committed to hold 51 per cent in CIAL, it did not pay its entire contribution. Now it wants only a 26 per cent stake.

Hudco and the Airports Authority of India are said to be eyeing a 26 per cent stake in the company.

However, indications are that the AAI offer may not be taken up, while Hudco's stake may be restricted to 24 per cent.