Carving A New Niche, With Elan! March 2018 issue

Cochin International Airport

Carving A New Niche, With Elan!

It is hard to believe that a couple of decades ago, when the Cochin International Airport project was envisioned, it started off with a contribution of just Rs.20,000 by an individual. A successful testimony to the value of PPP projects, CIAL today stands tall amongst Indian airports registering a cool Rs.141 crore in profits in FY2015.

Interview By Sisir Pradhan | May 2016 Issue | The Dollar Business

Some Indian states roll out red carpets to investors, while others literally don't allow businesses to cut through the red tape! Kerala was once one of the most difficult places to establish a business in India. If one has ever ventured into a business in the state, he would remember that it was hard to ignore the ubiquitous presence of trade unions. There was a much-publicised incident of nokku kooli (the infamous informal labour norm in Kerala) when Kochouseph Chittilappilly, Managing Director, V-Guard Industries, himself got on a truck and unloaded cartons.CIAL: Share holding pattern

A Star Is Born

Under such a highly unionised environment, how Cochin International Airport Limited (CIAL; India’s first airport to be built under public-private partnership – PPP – model), managed to see the light of the day, is a story that needs to be told. In fact, CIAL’s financial performance could make any corporate house in the country envious – there were reports that even Reliance Industries Ltd., and the likes, have shown interest in buying a stake in it. In FY2014-15, CIAL reported Rs.141.36 crore as profit after tax (PAT), a growth of 16% over FY2013-14, with the company’s Board of Directors having recommended a dividend of 21%.

Cochin International Airport (CIA) serves Cochin, a city also regarded as the business capital of Kerala. People in the region have strong business ties with the Gulf region, and Kerala's growth can also be linked to the economic boom in UAE and other GCC countries. Since, in the past, industrial development in Kerala has not kept up with industrial progress in other regions in the country, the state heavily depends on earnings from tourism and foreign currency remittances by Keralites living in different parts of the world. This dependence, however, came in handy when a healthy mix of renowned businessmen such as Yusuff Ali M. A. (MD – Lulu Group, UAE), V. J. Kurian (the present MD of CIAL) and other influential individuals came together to ensure that the CIAL project breaks-even way before average industry timespan.

Airport officials claim the facility to be a people's project, which is true in its own right – CIA is a true testimony to the Malayali enterprise. Many will find it hard to believe, but 16 years ago, when the project was envisioned, it started off with a contribution of just Rs.20,000 by an NRI from Germany named Jose Maliekkal. Later, Yusuff Ali M. A., who made a fortune from the boom in real estate sector in UAE, invested Rs.10 lakh in the airport project and raised more funds by establishing the Cochin International Development Forum in UAE. C. V. Jacob, Chairman of Synthite Group, also contributed Rs.25 lakh. In fact, the airport project was realised due to investment collaboration of about 10,000 NRIs, locals, the central and the state governments. That's something special.


Ever since it started commercial operations in June 1999, it has registered a significant growth in passenger traffic. Its cargo operations, which were initiated only a year later, had maintained a steady growth even during the global financial crisis of 2008, growing at a rate of 23.8% (international and domestic) in FY2009. In fact,ULD (Unit Load Devices) containers being loaded into an Emirates flight at Cochin Airport with the help of a self-propelled pallet loader. in the first eight years of operations, the airport recorded a cumulative annual growth rate (CAGR) of about 20%, and thereafter an average of 12%, with annual passenger traffic reaching about 6.45 million in FY2015. Revenues touched Rs.423 crore that year. What's more? CIAL has been paying dividends to shareholders continuously since FY2004!

When CIAL launched its new international terminal (T3) in February 2016, it once again exhibited its unique ability to finish the project in record time (24 months), that too at much lower cost as compared to its peers. Even the airport architecture that resembles a traditional Kerala temple gives a rather rustic appeal and is different from other contemporary airports that are made of Glass.

ULD (Unit Load Devices) containers being loaded into an Emirates 
flight at Cochin Airport with the help of a self-propelled pallet loader. 

Although all infrastructure needs are taken care of by the airport administration, sadly there are startling trade hurdles that have remained ignored for a long time. There are quite a few examples. First, while CIAL is located at Nedumbassery, about 40-km from the major trade centre in Ernakulam, most of the dedicated buses that ply between the city and the airport start from Fort Kochi, which is located towards the south-west of Cochin and is many kilometres away from Ernakulam. Also, there is no online or offline mechanism to know the actual pickup location and timing of buses in major trade routes like Ernakulam, due to which traders end up paying hefty charges for taxis which are again controlled by trade unions. Second, perishable goods like agricultural products form a majority of the cargo handled at the airport, and the lack of adequate and appropriate storage facilities at the cargo terminal is a big problem. Third, at present, consignments containing fresh harvests are dispatched as per availability of cargo space on aircraft. Because these need to be sent at the earliest, on several occasions delays result in losses for exporters. Issues there are aplenty, and which need to be addressed at the earliest for CIAL to attain a world class stature.

Multimodal Connect

Vegetables, fruits and cut flowers originating from different parts of Kerala, Tamil Nadu and even the Coorg region in Karnataka are some of tInternational cargo traffic handled by Cochin Airporthe major types of cargo handled at the airport. Apart from fruits and vegetables, one can also find all sorts of spices that make the Indian food popular across the globe, stacked up in big quantities ready for air shipment. If a lentil-based stew is served to you on your visit to the Gulf region, chances are high that the ingredients flew out of CIA. According to airport officials, people from Kerala and neighbouring states, who live in the Gulf countries, look to compensate their longing for homeland through food. Hence, fruits and vegetables produced in Kerala and its surrounding areas are in great demand overseas. Alongside, local farmers receive a much better value of their produce from overseas markets as compared to the domestic market – and it becomes hard to ignore the wealth that local farmers have amassed by exporting their produce from CIAL.

CIA is also one of the rare airports in the country which boasts of a multi-modal transportation system with access to three National Highways (NH 47, NH 17 and NH 49). For instance, the Cochin harbour and the International Container Transshipment Terminal (ICTT) are at Vallarpadam and the Delhi to Kanyakumari main railway line is located adjacent to the airport. This connectivity contributed to the growth of both passenger and cargo traffic at the airport. However, the heavy movement of container trailers, which serve ICTT at Vallarpadam, has led to congestion on roads that connect Cochin and nearby commercial regions to the airport.

Speaking of issues hindering growth, Antony Thomas, Vice-Chairman, Kerala Chamberof Commerce and Industry (KCCI) and Director, Kottaram Group of Companies, says that non-availability of direct flights from CIA to Europe and US, and a lack of industrialisation in the state are obstacles that stop CIA from growing faster. Further, cargo carrying trucks have to constantly deal with the congestion at the commercial check post at Walayar on the Kerala and Tamil Nadu border and this is a major obstacle that is impeding the smooth flow of perishable cargo to the airport from nearby states. Since the revenue of airport depends heavily on perishable cargoes like flowers, fruits, and other farm products, the congestion at state border is costing CIA heavily.  

Savings Zone

Interestingly, the convenience fee charged to passengers and freight forwarders at CIA is much lower than what is charged by other airports across the country. When we quizzed V. J. Kurian, MD of CIAL, on how the airport is able to offer services at such low costs, despite recently investing a big amount in constructing a new international terminal (T-3), he said that CIA has got the expertise to complete complex projects in a time-bound manner and at a much lower cost. "While the 5.4 million sq. ft. Terminal 3 at Indira Gandhi International Airport in New Delhi was completed in 2008 for about Rs.13,000 crore, the new 1.5 million sq. ft. Terminal 3 at Cochin International Airport was constructed for just Rs.1,000 crore," Kurian tells The Dollar Business adding that, "CIAL was conscious of the fact that they did not want to pass on the burden of construction cost to the users." The decision has paid off well.

Due to its low tariff, the airport is more economical as compared to other international airports and as such is fast gaining popularity among exporters and importers in the region. But then, there are other reasons too!

Easing The Flow

The airport largely handles perishable cargo for which it has a temperature-controlled warehouse and has introduced a risk management system (RMS) for quick clearance of cargo. The cargo handling facility offers 24x7 cargo operations and IATA-compliant e-freight operations for paperless transactions.Cargo traffic handled by Cochin Airport

The airport is also equipped to handle heavy and odd-size cargo – its terminal has a Pack House for small scale exporters for completing the ready-for-carriage conditions. CIA has also been identified as a transhipment hub for courier cargo movement by various airlines that fly between India and the Middle East. Adding to its advantage, the Department of Customs has stationed an Air Cargo Unit at the cargo terminal for faster clearance of consignments. The airport also serves as an international transshipment hub for nearby airports – Calicut and Trivandrum. In fact, due to the strategic and economic importance of the airport, 20 airlines have opened cargo offices at CIA.

CIA also has a dedicated facility to house officials of various intermediary and statutory bodies like Plant Quarantine, Postal Mail Transit Office, bankers and IATA/CHA agents.
When it comes CIA's future plans, the airport authorities are looking to tap the growth in cargo segment, particularly in marine products segment. There are also plans to develop new air cargo terminals for exclusive handling of export products as well as transhipment cargo to the tune of 1 lakh MMT per annum. Other development plans include an air cargo village with facilities such as Pack House, Regulatory Agents Building, Gems & Jewellery Park, Cut Flowers & Ornamental Fish storage and handling units, and an Air Freight Station.

Flying High

Ever since the Open Skies policy was introduced in India, the country’s civil aviation industry while having grown manifold, has also hit air pockets. Mismanagement and a lack of professionalism is a norm at many airports in the country. But then, there is no doubt that CIA has good future prospects. With commissioning of T3, the airport has already carved out for itself a glorious chapter in the country’s aviation history while keeping its value propositions and interest of its stakeholders on top priority. Even its proposed new air cargo terminals hold big promises for India's air cargo industry.

Seems just a matter of time before the airport begins its ascent to newer highs. Optimistic? Yes, we are.


“There Is A Huge Scope for Growth In Air Cargo"

V. J. Kurian_Managing Director,  Cochin International Airport Ltd. (CIAL)

 V. J. Kurian_Managing Director,  Cochin International Airport Ltd. (CIAL)

TDB: Cochin International Airport is seen as one of the most successful public-private partnership (PPP) projects in the country. What made it work?

V. J. Kurian (VJK): We tried taking risks right from the beginning. In fact, though the initial funding plan did not work in reality, we tried another plan which was to get money from both the future
travellers and future airport using agencies, and it worked great. We took another risk by starting runway construction with only 20% of land in hand. This acted as a catalyst and it sent a message among the people that the project is going to be a reality. Winning over people’s heart was important, and of course, support from the Kerala government is worth a mention.

TDB: What can other infrastructure developers learn from CIAL project?

VJK: Land acquisition was a major problem that we overcame, as we had to acquire 1,284 acres of land. We were required to carry out some demolitions and relocate a couple of churches and shrines. We faced severe opposition due to religious sensitivities but our team tried to convince the locals that they would be the major beneficiaries when the project materialised. It worked! Besides we gave them excellent rehabilitation packages. So if you win the people over, you can create wonders – later the project became a case study for the World Bank. 

TDB: What is you revenue expectation for CIAL in FY2015-16?

VJK: Revenue generated from passenger and cargo traffic for FY2015-16 should be Rs.507 crore.

TDB: Can you throw some light on the new international terminal (T3) that was commissioned recently?     

VJK: The new terminal was built keeping in mind the expected future traffic in the next 25 years. The cost was about Rs.1,000 crore and the terminal is spread across 1.5 million sq. ft. This two-level facility is three times bigger than the existing terminal and can handle 4,000 passengers in an hour. It has provisions for 112 check-in counters, with in-line baggage screening facilities, 100 immigration counters, duty-free shops spread over 30,000 sq. ft. at departure and arrival lounges, 19 boarding gates, 15 aerobridges, six baggage conveyor belts and a fully covered alighting and boarding area among other world-class facilities.

TDB: What is the contribution of air cargo to CIAL’s revenue? And what are the expansion plans with regard to cargo operations?

VJK: The airport’s turnover from air cargo operations for FY2014-15 was Rs.18.98 crore. With regard to expansion, we are planning to develop a new air cargo terminal that will exclusively handle export and transhipment cargo to the tune of 1 lakh MT per annum. We have plans to modify the import cargo warehouse and expand domestic cargo. Moreover, we are planning to set up an air cargo village with facilities including a Pack House, a Regulatory Agents Building, a Gems & Jewellery Park, a cut flowers and ornamental fish storage and handling facility, and an Air Freight Station.

TDB: What, according to you, are the major challenges and opportunities for the air cargo sector in the region?

VJK: Lack of major industrial units in the state, non-availability of direct flights to Europe and US, and the traffic congestion at the Walayar commercial check post on the Kerala and Tamil Nadu border obstructing a smooth flow of cargo from nearby states are a few hindrances. To add to these, there are three fully operational international airports in Kerala.

There are abundant growth opportunities in air cargo segment. Perishable cargoes within Kerala and from neighbouring states is fuelling growth, and the upcoming projects such as smart city and metro rail will help. As service charges are low at CIA, it works out to be economical for exporters and importers and the airport’s excellent connectivity through inland waterways, roadways and railways is an advantage.

TDB: Cargo handled by CIA compared to other airports in the country has gone up by 2.6% in FY2014-15. What are the major growth drivers for CIA?

VJK: In the last few years, many courier agencies have started operating from Cochin airport. Also the diversion of perishable cargo from nearby airports like Trivandrum and Calicut and other neighbouring states is a huge plus. Further, various airlines, which operate between Middle East and India, consider us as their transhipment hub for courier cargo. The growth of e-commerce has also resulted in an increase in domestic inbound cargo for the airport.

TDB: What is your message to importers/exporters who plan to use CIA?

VJK: Cochin International Airport offers one-stop-shop for all cargo requirements with a customer-friendly approach. The airport also has temperature controlled warehouse to handle perishable cargo. Some other features include a Risk Management System (RMS), 24x7 cargo operations, IATA e-freight operation for paperless transactions, and the availability of latest equipment to handle heavy and odd-size cargo.


“Cochin's Proximity To The Gulf Has Helped”

Antony Thomas Vice-Chairman, Kerala           Chamber of Commerce and  Industry (KCCI); And Director, Kottaram Group of              Companies

 Antony Thomas Vice-Chairman, Kerala Chamber Of Commerce and Instry ( KCCI); And Director, Kottaram Group Of Companies


TDB: How  would you rate the infrastructure and service quality with regard to cargo handling operations at Cochin International Airport (CIA)?

Antony Thomas (AT): The Kerala Chamber of Commerce and Industry (KCCI) finds the air cargo handling facility at the Cochin International Airport satisfactory. It offers a business-friendly environment, but I would like to point out two major improvements that are urgently required at the cargo terminal. Perishable goods, like agricultural products, form a majority of the cargo handled at the airport and the cargo terminal should provide better storage facility to store the goods. This arrangement can be implemented either by the cargo terminal operator or Container Freight Station (CFS) near the airport – something the government should address by providing funds directly or arranging funds through private equity.

The freight cost to transport vegetables and other agricultural products is very high while the profit margin is painfully low. For instance, if a kilo of bananas costs about Rs.15, the cost of air freight will be approximately three to four times higher. So when an exporter pays high freight cost, the landed cost will rise. And when products are sold to end users or retail buyers, the price becomes incredibly high. In this scenario our products are unaffordable or equivalent to the price offered by local sellers in the importing country. CIA is able to sustain because Malayali people living in the Middle East buy agricultural products from Kerala because of emotional reasons.

The government should encourage farmers to export their products as profit is much higher when compared to the domestic market. It would be good if the government extends some form of subsidy in air freight which will encourage exports. At the moment, consignments are dispatched as per the availability of cargo  space on the aircraft. But being perishable in nature, fresh harvests need to be sent at the earliest – on several occasions, airlines offer cargo space on late night or early morning flights. Also, if Customs clearance is not available, the consignment cannot depart, which results in losses for exporters.

TDB: But the Customs officials have told us that 24/7 clearance is provided at the airport!

AT: It is a 24/7 facility and Customs clearance is provided throughout. However, there were breaks in-between. The Customs department should ensure uninterrupted service.

TDB: How is the connectivity from the airport to the hinterland?

AT: Export of air cargo at CIA will increase only when agricultural products can reach the airport without difficulty. The government should develop connectivity between the airport and smaller towns and hamlets where farm
products are cultivated.

TDB: What are some of the advantages for users of this airport?

AT: CIA has a geographical advantage, making flight duration between the airport and major export destinations in the Middle East, very short. As a result, fresh products can reach customers within a short frame of time. Also, since the airport is away from city commotions, cargo carriers don’t face the regular city traffic and save time.

TDB: How would the new terminal help trade growth in the region?

AT: The new infrastructure will improve connectivity between the region and rest of the world. At the moment, business travellers have to travel to places like Mumbai, Colombo or the Middle East to reach Europe. To erase the hassle, the airport's Managing Director is trying to introduce direct flights from Cochin to Europe, which will boost traffic at the airport.

TDB: Air cargo traffic at CIA has grown immensely since its introduction. What are the reasons?

AT: The increase in the number of flights from Cochin airport to the rest of the world is one of the major reasons that has elevated air cargo traffic. Exporters from Ooty, Coimbatore and some other parts of Tamil Nadu are also using CIA – Coimbatore has an international airport, but with less direct flights to the Middle East. Also, the chamber had urged that the state government should exempt tax on export-oriented fresh farm products. As a result, the government allows free cargo movement through the check post at Walayar, in Palakkad district which is the first commercial tax collection gate on entry from Tamil Nadu to Kerala. In addition, KCCI maintains an office at the check post to facilitate faster movement of cargo.

In recent years, national and state highways have developed a lot in the region. The four-lane road from Coimbatore to Vadakkencherry, and from Thrissur to Cochin is in good condition, and once the new four-lane highway between Coimbatore and Cochin starts operating, we expect faster movement and higher traffic. Coimbatore, an industrial city, is a potential market for CIA as it produces chemicals and other goods which are low in weight but high in value.