Mumbai: Several airports in India are innovating on ways to cut costs to ride out the economic slowdown.
The Cochin International Airport Ltd (Cial), the first private firm to have built an airport in India, for instance, is tying up with a Kerala-based Ayurveda firm to grow medicinal plants instead of grass at its new international airport in Kochi. It spends Rs2.5 crore a year just to trim grass on about 100 acres.
This is purely a cost-cutting measure,” A.C.K. Nair, airport director, Cial, said on Tuesday. “In this proposed deal, Cial will not only save the cost of cutting grass, but also will earn a royalty of up to 10% on the turnover by medicinal plants sale.”
Pruning plans: The Bengaluru International Airport. The consortium that runs it has halved capital expenditure plans for this financial year. Hemant Mishra / Mint
“Blessed with rains, Cial’s land is fertile and it is difficult to get such vast land for medicinal plant cultivation, which is critical for ayurvedic treatment,” Nair said on the sidelines of an aviation conference organized by media business firm Terrappin Holdings.
Cial also saved money on re-carpeting its runways by completing the task in six months, with minimum disruptions to aircraft movement.
“We had made provisions to handle smaller and medium-sized planes in various phases, and we minimized the loss of revenue even in the time of runway resurfacing,” Nair said, without divulging the savings.
Between January and May, airline passenger traffic in India fell nearly 11% from a year ago to 17.3 million because of a slowing economy. Carriers such as Kingfisher Airlines Ltd and Jet Airways (India) Ltd, the country’s largest private airlines by passengers, are flying fewer routes and plan to further cut capacity by 20%.
Till these airlines start flying at full strength again, the airports are finding ways, both obvious and innovative, to keep their bills low.
“When the visibility is clear, and if it is above 3,000m, we switch off the lights on the runway,” said P.S. Nair, former chief executive of the GMR Group-promoted Rajiv Gandhi International Airport in Hyderabad and current chief executive of Delhi’s Indira Gandhi International Airport. “We could save around Rs48 lakh a year by switching off the lights of the runway (in Hyderabad). We have introduced this system partially in the Delhi airport as well.”
The Hyderabad airport saved Rs22 crore in fiscal 2009 through such measures and by renegotiating service contracts. It also engaged the National Productivity Council, a state-run body that provides training and consultancy in improving productivity, he said.
The Delhi and Hyderabad airports have also resorted to videoconferencing to save travel costs. “The whole travel policy was rationalized to cut cost. We are also deferring some capital expenditure in the context of the downturn,” P.S. Nair said.
Sven Deckers, a director with Lufthansa Consulting GmbH, which advises airlines and airports across the world, including in India, does not expect airports to gain much from such measures. “Switching off lights will not give airports huge savings. Since airports are incurring huge capital cost, they will have to look at various measures to increase revenues, such as non-aeronautical revenues or increasing cargo volumes,” he said. “Though airports will have to focus on small measures, they will have to look at long term and big steps.”
The Siemens AG-led consortium that built and runs the Bengaluru International Airport is headed in that direction. “We have halved our capital expenditure plans to Rs35 crore from Rs70 crore for this financial year with the downturn in passenger traffic,” said Marcel Hungerbuehler, chief executive of Bangalore International Airport Ltd. “This capital expenditure would include many items, such as procurement of equipment, installation of certain IT (information technology) infrastructure and other things.”
The airport in Bangalore has also resorted to simpler measures, such as using large windows to save on electricity bills. “Cost-consciousness is an attitude. During this time, cost-consciousness is our obligation and responsibility,” Hungerbuehler said.
A senior executive at Mumbai International Airport Pvt. Ltd, a GVK group-controlled firm that runs the Chhatrapati Shivaji International Airport in the financial capital, said the airport is looking at substantial savings from big measures, including outsourcing of maintenance and service contracts. But small savings still matter.
“We are also targeting small savings. For instance, we have replaced tube lights with LED (light-emitting diode) lights and we are depending more on natural light during day time,” said the executive, who did not want to be named. “We will switch off air conditioners when it is not really required.”