The Hindu Business Line : HAL allows transfer of civilian traffic to new Bangalore airport

HINDUSTAN Aeronautics Ltd (HAL) airport has agreed to allow transfer of civilian domestic traffic to the proposed Bangalore International Airport, smoothening the take off of the much-delayed project.

This was one of the major technical issues plaguing the project, as seen by financial institutions, which seemed to squeeze the revenue flows of the proposed international airport. The project was cleared today by the Union Cabinet, paving the way for brisk financial closure, top State Government officials said.

The new airport is expected to handle four million passengers annually, of which close to one million is estimated to be international; and handle cargo load of 130,000 tonnes per year. The existing airport currently has the capacity to handle two million passengers and 30,000 tonnes of cargo annually.

The other technical issue that was resolved was that of sovereign guarantee obligations. Under this clause, the Centre was expected to meet revenue shortfalls in the event of suspension of traffic from the airport.

ICICI Bank is expected to be the lead arranger for the Rs 1,200-crore project. The bank has agreed to underwrite the entire financial debt amounting to Rs 515 crore. The project has been estimated to be nearly evenly divided between equity and debt. As per the shareholders' pact, the project was estimated at $200 million as a basic cost and an additional $30 million provision includes a 7.5 per cent provision for escalation and an equal contingency amount. The State Government is to provide a support of $60 million-$75 million (around Rs 300-375 crore) including the extra provision. The consortium will come in with $155 million in equity and debt, to be raised from a team of domestic and international FIs.

The contract to construct the new airport was awarded to a consortium led by Germany's Siemens group, which is partnered by local construction major, Larsen and Toubro. The private consortium holds a 74 per cent stake in the airport company, Bangalore International Airport Ltd, while the Karnataka Government and the Airports Authority of India hold 13 per cent each. According to initial estimates the 4,200-acre project is likely to take 30 months to build.

Airlines hail move: Several airlines have welcomed the decision of the Government to clear the Bangalore international airport project.

An Air India official said the airline would now look to expanding the existing capacity from Bangalore, though no plans have been firmed up yet. He said the airline was continuously expanding its presence from Bangalore.

Another international airline official said this will pave the way for more international airlines to increase their flights from Bangalore while those who do not fly out of the city can consider operating new flights from here.