Study the economies of why an asset created is not utilized by prospective users : Bangalore Internationakl Airports Ltd - Aerobridges

Abstract

The recently constructed Bangalore International Airport Limited faces a unique problem. The 8Aerobridges are being charged on the basis of usage by Airlines and Low cost airlines are not using theirservices. The LCC continue to outsource their ground operations and continue to embarking/disembarkingtheir passengers by means of passenger coaches. This observation leads to questions about the economiesof aerobridge pricing and doubt about whether or not charging of aerobridge services was a right decision.BIAL is a privately owned and managed infrastructure. Their strategy to generate revenue from everypossible service offered is self justified. The aerobridges at BIAL at the present time are fully utilized andare only catering to full services and international carriers. The priority of service is higher forInternational carriers leaving about 9% of the total demand unmet.Our project was focused around investigating and understanding the possible reasons of non-utilization ofaerobridges at BIAL by Low cost carriers. The methodology we followed was very structured. The first stepwas secondary research by means of literature review to understand the current scenario in the aviationindustry, working, pricing and costing of airlines and airport charges. The next phase of the project wasframing of a questionnaire that would be used to gauge information from primary sources of information.The primary sources of information were determined by means of convenient sampling and were middleand high ranked officials in various airlines and at BIAL.The investigative aspect of the project reveals insights about the working of airlines. The outsourcing ofground operation to vendors like "Globe Ground" and "Air India Sats" made it evident that costminimization was the primary focus of Low cost airlines. The exception to complete outsourcing was Indigoairlines, which managed passenger movement during arrivals and departures on its own. The coststructure of Indigo airlines made it evident that using Aerobridges can lead to as high as 7.02% drop intheir monthly revenues.The pricing strategy of BIAL for aerobridges was generating revenues of about Rs. 186,679,250 annually.However, only 91% of the total demand was being serviced by the 100% utilized aerobridges. To servicethe rising demand and increase in traffic movement at BIAL, minimum 4 aerobridges will be required. Theexpansion will be capable for serving the demand for the next 5 years. Under the expanded infrastructurepricing model to engage even the Low cost carriers was suggested. Aerobridge charges of about Rs. 22 canbe included in the User Development Fee component of airport charges and annual revenue of Rs.230,186,932 can be generated.