Bengaluru's second airport: a minefield of regulation, location, competition, politics & obfuscation

Karnataka state government to submit formal proposal for a second airport at Bengaluru (or thereabouts)

India's Karnataka state government plans to submit to the Airports Authority of India (AAI) a formal proposal for the construction of a second airport in Bengaluru.

The government has identified seven potential locations for the airport, which would not open before 2033 due to an exclusivity clause between the government and Bangalore International Airport Ltd, also known as Bengaluru Kempegowda International Airport, IATA code BLR.

BLR was the third busiest Indian airport in 2023, with 37.2 million passengers (+35% on 2022), behind the Delhi and Mumbai airports and ahead of Hyderabad. It also hosted the carriage of 422,600 tonnes of freight. Those were record numbers in both categories since the airport opened.

Bengaluru already has another airport, with the same operator, but it won't be brought back into regular commercial service

The position in Bengaluru is already a complex one.

Apart from BLR, a 'second' airport already exists, at least in theory, at HAL Bangalore International Airport (also known as Hindustan Aeronautics Limited Airport), which previously served the region as the primary airport until operations were suspended in 2008 due to the opening of BLR.

Since then the airport has been exclusively used as a testing facility by Hindustan Aeronautics Limited (HAL) and the Indian Armed Forces.

In 2020 the Karnataka Government extended its concession agreement with Bangalore International Airport Ltd (BIAL) for the operation of BLR for an additional 30 years. Included in that deal was a clause to the contract, permitting BIAL to operate HAL Bangalore International Airport.

In other words, the operator of the main airport is also the operator of another one which had previously been the main airport. In the same way that Airports of Thailand is the operator of both the two main Bangkok airports, one of which it closed to commercial operations and then brought back into service (Don Mueang).

The HAL airport has a perfectly serviceable 3,300m x 60m runway which should be able to manage just about any aircraft in commercial service, and it does still handle a small number of commercial passengers - 20,000 in 2023 and 8,800 in 1H2024.

What's more, Hindustan Aeronautics has spoken often with BIAL and the government in an effort to reopen the civil facility and increase the airport's revenue. Although the Defence Ministry agreed with HAL, BIAL has remained opposed to amending the concession agreement for several years.

In 2020 BIAL said that once BLR was operating at maximum capacity (it obviously was not at the time, owing to the COVID-19 pandemic), it would contemplate allowing passenger operations to resume at the HAL airport, and that the envisaged date was 2023/24.

BLR isn't at maximum capacity, and won't be until 2025

It is arguable whether the airport is operating at full capacity, despite strong and consistent traffic growth to its highest-ever total in 2023.

Bengaluru Kempegowda International Airport: annual traffic, passenger numbers/growth, 2009-2024

Source: CAPA - Centre for Aviation and Airports Authority of India.

In fact, peak usage for both passengers and freight - at 110 million passengers and 1.10 million tonnes - is not expected to be reached before 2035.

Many recent infrastructure enhancements

The airport's second terminal began operations as recently as Jan-2023, augmenting the capacity of the airport by an additional 25 million passengers per annum.

The second phase of Terminal 2 is planned and is expected to provide an additional capacity of 20 million passengers per annum, thereby increasing the overall capacity of the terminal to more than 45 million passengers per annum.

There are also plans to build an APM (Advanced Passenger Movement) rail system, which would allow passengers to connect seamlessly between Terminal 1 and Terminal 2, and eventually to a projected Terminal 3, which could be built before the end of the decade.

In addition to all that, there has been - since 2010 - a cargo village, spread over 11 acres (4.5 ha), with three cargo terminals, including one that can store pharmaceutical products. In the MRO sphere: in Feb-2024 Air India signed an MoU to establish facilities, starting with airframe maintenance through the development of widebody and narrowbody hangars for all checks, including heavy structural checks.

BLR, one of the first Indian airports to be privatised by concession in 2006, does seem to be a comprehensive unit that has catered well for rapid growth.

The assumption behind the desire for a second airport must be that passenger growth, in particular, will outstrip all the existing high travel projections for the entire nation.

Restricted by a proximity clause

HAL would make for a suitable alternative in most cases, ticking many of the boxes, but the boxes it does not tick relate to its location.

Firstly, a proximity clause which restricts the establishment of another airport within a 150km radius from BLR.

To all intents and purposes locating an airport outside that radius would hardly make it a Bengaluru airport, unless there was a very rapid train service. The fact that HAL was once the main airport for the city doesn't count. It would still be 'another airport.'

The furthest examples of secondary level airports to their 'named city' in Europe, where they proliferated in the early 2000s are 125km, 120km and 100km (Frankfurt to Frankfurt Hahn, Oslo to Oslo Torp, and Stockholm to Stockholm Skavsta airports, respectively).

Even Ryanair would not try to sell the idea beyond that distance.

When a consortium of public and private operators tried to establish Ciudad Real airport as an alternative to Madrid Barajas almost 20 years ago its 190km distance was too great, even with a regular, frequent AVE (Spanish high speed rail) connection. The airport rapidly floundered and eventually became an 'aeromuerto'.

And HAL is too close to the downtown/CBD

Even if that clause did not exist, HAL is only 12km (7.5 miles) east from the Bengaluru city centre, compared to 35km (22 miles) north in the case of BLR. In the existing climate of environmentally determined decision-making, the restoration of commercial services at HAL would be considered untenable.

2032 expiration date suggests that a new airport could open the following year

But there is a twist in the tale.

The clause expires in 2032, which opens the possibility for a new airport by 2033. On that basis, and considering the time required for land acquisition and compensation for landowners (which is a perennial problem at every new airport in India), the government has initiated the planning process.

Karnataka finds itself in competition with neighbouring Tamil Nadu state

Another twist is that it seems the Karnataka state wants to get ahead of the game with AAI by gaining advantage over the neighbouring Tamil Nadu state, which is pushing for an international airport at Hosur, about 40-50km by road from Bengaluru.

Location map: Bengaluru, the Kempegowda airport at Hosur (in red)

Source: Google Maps.

Hosur is an industrial city with a population of 500,000. It is closer to some of Bengaluru's key industries (mainly electronics and IT) to the south of that city than is the Kempegowda Airport.

There is an aerodrome at Hosur, but not a commercial airport yet. Its owner is Taneja Aerospace and Aviation Limited, established in 1994 as the first private sector company to manufacture General Aviation aircraft in India.

Hosur is exactly the type of mid-sized city where AAI would love to locate a new airport, as part of its grand scheme to increase the number of them from 149 to 200 within five years.

(The desire to build is so strong that an announcement is made virtually every day about a new airport. While this report was being written, for example, the Tamil Nadu State Government let it be known that it intends to launch a tender to find a concessionaire to develop a USD4 billion airport in Parandur between Jan-2025 and Mar-2025, which will act as a second airport for Chennai. The proposed airport will have the capacity to handle 100 million passengers per annum).

Seven possible locations and counting

The actual location of the new Bengaluru airport is another bone of contention, and again that is often par for the course in India, along with land reclamation. Indeed, the difficulties of land reclamation often impact directly on the selection of a site.

As things stand currently, Harohalli and Dobbaspet, two suburbs about 50-60km away from Bengaluru, are among seven locations the government has shortlisted that are being posited as favourites. That puts them well within the standing 150km radius limit.

The other five locations are: near Tumakuru, near Koratagere, near Kunigal, near Huliyurdurga and Malavalli.

Harohalli lies to the southeast, approximately halfway between Bengaluru and Hosur, while Dobbaspet is to the northwest on National Highway number 4.

Tumakuru is 20km further on, on the same highway.

Koratagere lies north-northwest at around 90km, and Kunigal due west at 75km.

Finally, Huliyurdurga is 95km to the west-southwest, and Malavalli 110km to the southwest, the most distant of all.

The decision will be guided by parameters, not politics

The state's Infrastructure minister, M B Patil, maintains that the decision on the second airport's location will not be based on political considerations. Although no particular site has been "zeroed in on" yet, the decision "will be guided by approximately 15 parameters set by the AAI, as well as the overall development of Karnataka, including Bengaluru".

The more we delve into this prospective venture the more it is realised that there is strong interstate rivalry in play, with some MPs concerned that Bengaluru "has already lost a fair share of the deal in terms of manufacturing units to Tamil Nadu", and that "the government should proactively step up efforts to start the new airport for Bengaluru".

Some MPs have insisted that the new airport should be constructed in specific places that "would be both geographically and strategically advantageous for the city," citing Anekal and Bidadi.

The former is due west of Hosur, right on the state boundary line, and the intention seems to be to thwart expansion of the Hosur airport, which is virtually next door.

The latter does make some sense, as it would be equidistant from the centre, as is BLR, and directly southwest; where BLR is northeast thus able to host traffic that is related to the electronic industry sector.

The one thing that the politicians seem to be in agreement on is that there is little point in building a new airport 100km or more from downtown.

Ergo, it would surely be better for the governments involved and the AAI to take their time over the decision, on the basis that BLR is not going to explode from insufficient capacity in the foreseeable future; to take a studied position, and perhaps even appoint an independent commission, or a committee of consultants, to oversee the process and to prepare a detailed case for each location.

Yet another greenfield airport nearby queers the pitch

And there is yet another complication in this instance, as a separate new, greenfield Bangalore airport is already under construction at Vijayapura (also known as Bijapur Airport and Jagatjyoti Shri Basaveshwar Airport). This is only 20km northeast of the BLR airport and 50km from Bengaluru downtown!

Its cost, for a 1,900m runway and a single terminal building for domestic flights only on a 730-acre site is around USD50 million.

That project dates from 2015, has been through the usual 'mill' of procedures, and was scheduled to open in Feb-2024 - but there is no evidence that it actually is.

The rationale behind that airport is that it would serve several tourist destinations in the locality, including Vijayapura, and also act as a reliever for BLR.

So effectively another Bangalore airport has already been built, well within the minimum distance specification, and it is one of five airports added in Karnataka state since the COVID-19 pandemic outbreak.

This desire for ever more airports is determined by an air transport sector that never stops growing

One difficulty that India faces, in common with eastern and southern China, is proliferation of medium-sized cities of approximately 500,000 people. There are 93 cities alone with a population between 250,000 and 500,000.

In other countries they might not merit their own airport, and at best would be lumped together under a single brand. Like the East Midlands Airport in the UK, which services the cities of Nottingham, Derby and Leicester; or Euroairport (Basel, Mulhouse, Freiburg on the borders of Switzerland, France and Germany) and the Quad Cities Airport in the US (Davenport and Bettendorf in southeastern Iowa, and Rock Island, and Moline/East Moline in northwestern Illinois).

But India is different.

Not only is it the world's most populous country now, its anticipated aviation growth over the next decade and beyond puts everyone else in the shade. Meanwhile, it acquires a broader 'middle class' every day, with disposable income and an ever-growing travel demand.

Surface transport can't compete

Weighed against that is a rickety old rail network which, while it is the world's fourth longest, remains mainly tortoise-like compared to air travel, and a long-distance bus service which, while modernised and much improved, again cannot compete for speed.

And yet even so, there is the impression that some schemes see the light of day without much in the way of due diligence having been applied to them. The right hand not knowing what the left hand is doing might be an idiom too far, but communication does seem to be absent sometimes.

Who pays for all this?

Finally, there is no clarity on who will pay for a new Bangalore Airport.

Historically the principal airports, including BLR, were owned and operated by AAI, the authority then retaining a stake (usually 26%) when they were concessioned. But AAI latterly is slowly exiting its equity stakes in some of these existing concessions, as well as transferring control wholesale on newly privatised ones, at the same time as it takes on responsibility for some smaller facilities and greenfield sites.

It has also been AAI's practice to offer first refusal to an existing operator or consortium on a new airport for the same city.

That was the case with the Jewar Noida Airport, which will serve as Delhi's second airport. GMR Group held first right of refusal for any new airport in Delhi as the majority shareholder at the existing airport, Indira Gandhi, but did not take up that option, the operating rights eventually being taken by Flughafen Zürich.

Ownership has changed, but Fairfax Group remains in charge

In BLR's case, the ownership situation is thus.

The airport is operated by Bengaluru International Airport Limited (BIAL), a public limited company, under a 30-year concession with the option for another 30-year extension.

As such, it is a public-private venture by way of a private consortium and two public entities. GVK was the principal private investor but divested its stake in two tranches (2016/18; 43% in all) to Fairfax Holdings, which was already an investor.

Today, with some further readjustment, private promoters hold a 74% stake (Anchorage Infrastructure Investments Holdings Limited, a subsidiary of Fairfax: 43.64%; FIH Mauritius Investments LTD (another Fairfax subsidiary): 20.36% and Siemens Projects Ventures: 10%), while AAI and the Karnataka State Industrial Investment and Development Corporation (13% each) hold the remaining 26%.

AAI said in 2021 that it would sell its shares to raise funds, but has not yet done so.

Other investor/operators will be attracted

So which of these private sector parties might be offered first refusal on a new Bangalore airport?

Not Siemens, which has halved its holdings and is a small player in the global airport investment sector anyway.

Possibly not the two Fairfax subsidiaries, which are investors rather than operators, either.

There will be others waiting in the wings, perhaps including Flughafen Zürich, which has reconnected with India, and Fraport, which is also rediscovering its initial enthusiasm (but not as a 10% shareholder).

Meanwhile, home-grown entities like Adani Group, already the operator of eight airports, will be keen to get a piece of the action, even though Adani has latterly turned its attention to large-scale investments at existing properties and foreign ventures.

So - buckle up for the ride, even if it won't be getting under way just yet.