Indian airports stretched as passengers reach new heights
Indian airports stretched as passengers reach new heights
The country is witnessing a huge boom in air travel as its growing middle class increasingly takes to the skies but experts say infrastructure is failing to keep up.
“There’s an urgent need for capacity building in major Indian airports as they are bursting at the seams and close to saturation,” Binit Somaia, South Asia Director at the Center for Aviation (CAPA), told AFP.
India has witnessed a six-fold increase in passenger numbers over the past decade as citizens take advantage of better connectivity and cheaper fares thanks to a host of low-cost airlines. Indian airports handled 265 million domestic passengers in 2016 and will cross 300 million this year, according to CAPA. The country’s entire airport network is only capable of handling 317 million passengers, it said. According to data compiled by the Directorate General of Civil Aviation (DGCA), an Indian regulatory body, there were just 44 million Indians traveling by plane in 2008.
Now CAPA predicts India will overtake Britain as the world’s third-largest market by 2025 and will have 478 million fliers by 2036.
Aviation experts say the government faces a race against time to build the infrastructure to handle the soaring congestion.
“Some top airports have reached saturation. In the next five to seven years, the top 30 to 40 airports in India will be performing beyond their capacity,” said Somaia of the Sydney-based CAPA. Flights have increased by around 20 percent every year over the last three years, stretching many airports to breaking point.
Travelers can snap up tickets sometimes for as little as 1,000 rupees ($15) — cheaper than many fares on the country’s rickety train network.
Ten Indian airports — including Dehradun, Jaipur, Guwahati, Mangalore, Srinagar and Pune — are already operating beyond their capacity, CAPA said in a report released last month. Others are nearing their limit. The aviation body predicts that New Delhi’s Indira Gandhi International Airport and Chennai’s International Airport will reach their handling capacity within four to six years.
The situation is even more pressing at Mumbai’s Chhatrapati Shivaji International Airport (CSIA). CAPA says it is at 94 percent capacity and is “close to saturation.”
Earlier this year, the airport said it had broken its own world record for handling the most number of arrivals and departures on a single runway in one day. Some 980 flights landed and took off within a 24-hour period.
Domestic travelers flying into India’s financial capital regularly complain of flights having to circle for up to half an hour before the plane is given a slot to land.
The airport is surrounded by slum settlements, making it impossible to increase the number of runways and highlighting the problem of acquiring space for infrastructure projects in India’s heavily congested cities.
The government is building a new airport at Navi Mumbai, 30 kilometers away, to ease the burden. It has been repeatedly delayed due to land disputes and is currently scheduled to open in 2023.
“The situation at CSIA will worsen until the new airport is operational,” Amber Dubey, India head of aerospace and defense at global consultancy KPMG, told AFP, describing the delays as “unacceptable.”
Prime Minister Narendra Modi has made making air travel accessible to all a key priority since his election in 2014. He recently launched a scheme to connect remote regions of the country by air.
In the budget last month, Finance Minister Arun Jaitley allocated $613 million to the Airports Authority of India to expand facilities.
CAPA estimates that India needs to invest $45 billion by 2030 to keep up with demand.
“The government needs to ensure we have infrastructure to manage (the) growth rate,” Manish Agarwal, an infrastructure expert at PricewaterhouseCoopers, told AFP.
INTERVIEW: SABB Managing Director David Dew steering through historic transaction in Saudi banking
DUBAI: David Dew has been working in banking in the Middle East and other emerging markets for 40 years, and you might think he has seen it all. But the merger between SABB and Alawwal in Saudi Arabia — which he is steering through to completion next year — is a career achievement for him.
“I think it’s a clear case of a win-win situation, and all our stakeholders will get benefit from it. It’s a genuinely exciting landmark transaction, and a significant transformation for the Kingdom,” he said.
It is a historic transaction, Dew explains. “It is the third biggest banking merger in the history of the region — the other two were in the UAE with significant government ownership — so SABB-Alawwal is also the biggest private banking merger for 20 years. It’s the first since the Capital Market Authority (CMA) was formed and the first since the new takeover rules came in.”
The merger will create the third biggest bank in the Kingdom by assets, loans and deposits, and — perhaps more significant in the current financial environment — forge a bank that is unashamedly international in its outlook. The transaction has its origins in the different imperatives of foreign banks operating in the Kingdom. Saudi Arabia has been identified as a global growth market by HSBC, which holds 40 percent of SABB — full name the Saudi British Bank.
Alawwal — the “first bank” in Arabic, reflecting its long heritage in the Kingdom — was dominated by a consortium of foreign banking interests, notably cash-strapped RBS (Royal Bank of Scotland) of Britain. RBS and its consortium partners — from Spain and Holland — wanted to reduce their overseas footprint. Getting out of Alawwal was a logical move from that perspective.
RBS and the Spanish bank Santander — which would each have about 4 percent of the enlarged company — have undertaken not to sell their shares for six months after completion.
Born: Farnborough, UK, 1955
•Farnborough Grammar School
•University of Cambridge, MA in Economics
•British Bank of Middle East, Oman
•Various positions around the world with HSBC
•Managing director, SABB
The foreigners’ different strategic interests might have been the original spark for the merger, but Dew firmly believes it is in the best interests of the Saudi banking business, and bank customers. “Our first stakeholder is the Kingdom, and the merger is a great example of why and how Vision 2030 is actually working. It’s showing that Saudi Arabia is open for business. An important part of the Vision plan is the financial sector development program, and this merger shows it is working.
“The idea is to grow and develop capital markets, and this will help the Kingdom do that. It’s the kind of thing that just might not have happened even a few years ago.”
The next set of stakeholders he is working to satisfy is the regulatory establishment. The deal has been quite a long time in gestation, and much of that time has been taken up in getting it just right from a regulatory standpoint. “It’s taken a bit longer than you might have expected, but the regulators have been with us all the way — the CMA, the Saudi Arabian Monetary Authority, and the Ministry of Finance. All good things take time, and it is more important to do it right than to do it quick,” he said.
The next key group of stakeholders are the shareholders on both sides. In addition to HSBC and the RBS consortium, there are big investors in both banks in the shape of the Olayan conglomerate, and the government agency the General Organization for Social Insurance. Both have recused themselves from involvement in the merger negotiations. But both boards have recommended the merger terms.
“We’ve explained the business rationale and made a compelling case to them that the merger creates value. There will be a circular from both parties to all shareholders, we hope, by the end of the year.”
The next stakeholders on the list are the customers. “I know it’s a cliche that the customers are all important, but it’s true, and they will see real benefits,” Dew said.
Comprising as much as 75 percent of the new bank’s business, the corporate sector will be crucial. “It will be the leading corporate bank by lending, and will offer other products, too, for example trade finance. It will also be the leading cash management business, and a significant foreign exchange provider.
“I think it will occupy a powerful corporate position and overall will be a bellwether for the underlying economy, so it will be followed closely by anybody interested in the Kingdom’s business,” Dew explained. With a market capitalization of about SR65 billion ($17.33 billion) and a sizeable free float on the Tadawul, it will be valuable proxy for investment in the modernizing Kingdom.
The new bank will also use its connection with HSBC’s powerful investment banking operation in Saudi Arabia to help satisfy customers’ needs in that segment.
In the retail sector, it will never be as big as NCB or Al Rajhi, market leaders with more than 50 percent of the retail market between them. But with about 10 percent of the Kingdom’s retail market, Dew feels it will be approaching the “tipping point” at which it becomes a serious player.
“The home loans market is critical. We estimate we’ll have 16 percent of that market, which is vitally important to the changes that are happening in the Kingdom,” he said. It will also have around 20 percent of the Saudi credit card market, he estimated.
“We will redouble our efforts to offer a good SME (small and medium-sized enterprises) proposition. SABB has not done enough in this sector, but we will do more, and the ability to do it will be enhanced by the merger,” he added.
“For corporate customers, we will be able to offer the biggest balance sheet and underwriting capability, which adds up to more ‘muscle’ for corporate clients. For retail customers, we will offer additional scale and focus, especially on the digital side. This is the future for the retail banking business, and we will build on Alawwal’s strengths here. They are pretty good in digital already. They have punched above their weight,” Dew said.
The final group of stakeholders are the employees. “Again it is trite to say ‘We are nothing without our people,’ but I happen to believe it. We have promised and we mean it, that there will be no involuntary redundancies. That does not mean there will be no losses through attrition. People come and go all the time, so that is only natural,” Dew said.
The new bank will have 4,800 employees, more than 90 percent of them Saudi citizens and 20 percent women. Its new chairperson will be Lubna Olayan, head of the eponymous conglomerate and one of the leading business figures in the Kingdom. “She has a track record in business, leadership expertise and international connectivity. To have somebody like that as chair of the new bank is an incredibly powerful statement. She will also be the first female chair of a listed Saudi company,” said Dew, who will be managing director of the new entity.
The bank will start operating in what Dew sees as an improving economic and financial environment in the Kingdom, with the long-promised privatization and initial public offering program materializing. “Two years ago, growth and bank lending were falling. In 2018 there has been a modest but significant improvement, and I do believe next year is going to show further improvement.”
On the geopolitical background, always a big factor in the business climate in the region, he brings a historical perspective to bear.
“When I came here 40 years ago, Israel-Palestine was the big issue. Since then, the region has become even more complicated and volatile. But business has navigated through these problems and I’m confident it will do so again. It’s all about having strong foundations,” he said.