Bharath:  You rightly said that  Cochin airport is a first public-private partnership airport. The airport came as a result of initiatives of the people of Kerala. The airport uses of the NRIs who are working in the Gulf got along with the government of Kerala to put up the airport. The Government of Kerala, the airport users, few industrialists, some of the NRI industrialists and stakeholders got together to put up the airport.  The success story of the airport is because, we have been very aware of the governmental needs as well as the needs of the shareholders. So, we have been able to protect their interests in a very balanced way. Second, though the government is a major player in the company, there has not been much government interference in the affairs of the company. So, the company has been able to do well.

NDTV: So, you are also in a sweet spot that you are in Kerala. Larger part of the Gulf’s revenue comes out of Kerala. You probably are the biggest international airport in the state and this gives you an edge. How much of that contributed to the success of Cochin airport?

Bharath: One good thing about Cochin is that, it is equidistant from north and south of  Kerala. So, our feeder population is about 100 – 150 kms on the either side of the airport. We have got a very good infrastructure at a very cost effective price. Our runway length is 3.4 kms. Our charges are also very reasonable.

NDTV: Earlier the airport has the highest ground handling charges. Now, though it is still higher compared to other airports, the airlines always complain that you do not give them reasonable rates. What is the reason behind that and what are you doing to correct?

Bharath: There were complains earlier regarding the high ground handling charges at Cochin airport. When the airport started, we went through the bidding process. We asked for highest security deposit from the bidders and also requested them to take a stake in the airport. Air India was able to fulfilled both the conditions and so we gave them the bid. Since it was a unilateral bid, so they were fixing high rates initially for ground handling. Over a period of time, we realized that it will hurt the airport operator and so in the last two- three years, especially from the time I took over, we made the rates very competitive. I don’t think it will be more than 10 to 15 per cent from other airports. As if now, it is much better than before.

 NDTV: Do you see breaking your ties with Air India coming forward or you want them to reduce rates?

Bharath: As per the agreement with them, they have to consult the airport operator before fixing up charges. So, obviously, we would like more airlines to fly in our airport. We also have the vision that in the year 2015, we want it to make a landing and parking free airport, which is a very ambitious vision.  I would definitely like the rates to be competitive and so we always emphasis to Air India that the rates cannot hurt the airlines. First, they have responded positively to our needs. Second, the agreement with Air India is getting over by June 2009. After that, airport operator can do the ground handling or we can have a fresh bidding process where we would fix certain service standard and cost effective process. Both these parameters will be the basis of the bidding process to ensure that passengers and airlines don’t get hurt where we would be able to provide best of the facilities at a cost effective price. That is what the airport operator has in mind.

NDTV: Talking about the revenues and financial, what is our revenue right now and where do you see it going in the next five years?

Bharath:  Last year, the gross revenue was Rs115 crore and EBITDA figures were 73 to 75 per cent, which is an unheard figure in the aviation or any infrastructure industry. We also had Profit Before Tax (PBT) figures of 42 per cent and PAT was 39 to 40 per cent. That’s why we have been a business case study for Howard Business School and Indian Institute of Management. Their students came and had detailed investigation to find out how the model become successful and how we maintained high margins in a cost effective price. The main reason is our effective work culture. We kept our employee strength very low and so the employee’s efficiency to revenue contribution has been high.   We are very sensitive to the needs of our stakeholders and the most important is that, we are able to gain revenue from the non-aeronautical sources. That’s a very powerful source. Almost 45 per cent of our gross revenue comes from the non-aeronautical sources.

NDTV: The government is a major stakeholder in your company so it brings good advantage of transparency and responsibility but do it sometimes bring political interference and interference in other matters such as hiring, labour and things which can get sticky sometime. We have seen in the recent past that airport do get into the mess like that so how that had been a challenge for you?

Bharath:  The credit for this should definitely go to Government of Kerala because from the beginning it had a hands-off approach. The chief minister of the state is the Chairman of the board with four other ministers are the directors. All decisions, political or not were debated to the board. If it is a Left government, we have other directors who are industrialists of Kerala. Once the board takes the decision on a particular issue, then the CEO has to implement the policy. A certain amount of government’s initiative is important for policy making, to lobby in the state itself for example, if the CM is in the board, we could get certain clearance and certain benefits from the state government and Government of India quickly.  Other advantage was that, we were giving importance to people who had lost land and houses for the benefit of the airport. With government, corporate social responsibility was also inculcated into us. We empowered people around the airport, in terms of employment and giving opportunities. The government also balanced it very well so that we can get best of both the world.

NDTV: You also started outsourcing way back in early 2000 that was something completely unheard of. Did it work well for you as a good formula?

Bharath: That was one of the reasons for the success story. If you know about the Airport Authority of India, all the staffs, even the non-core areas were manned by them. The labour cost was very high. As far we are concerned, only the core area was kept with the airport operator and the non-core area was outsourced. Outsourcing was done with a human face where we give first preference to people who lost their houses and land for the airport. So, even though we outsourced to certain agencies, we asked them to give certain percentage of reservation to them, subject to qualification. We are able to get competitive price to those. So, that’s why were able to maintain our profitability, which in turn we passed to the company, staffs and people around the airport.

NDTV: Moving away from the Cochin airport to the company, Cochin International Airport Limited (CIAL), are you looking at expanding and for what kind of expansion?

Bharath:  No, this is an in-house model developed in India and it has been a success story. Nowhere in the world, the airport has been built in such a cost effective price and so we want to carry this model forward. We want to share this experience both in India and abroad. Recently, the Government of Srilanka has invited us. They went through the international bid and they have invited Cochin airport to build an airport for them in Southern Srilanka. They want the airport to be built on similar lines as Cochin airport. We have the expertise and so we don’t want to expose to huge investment where loss can also be made. To leverage it, we are in talk with global players; both financial and technical players and we planning to built a consortium. It should be a special purpose vehicle(SPV), where CIAL will take a majority stake and other consortium holder will be given a stake. That particular SPV will start bidding for airports, both India and abroad.

NDTV: The airports that you are looking in India will be larger one or you are focusing on smaller airports?

Bharath: Our focus will be on smaller airports because we are specialized in smaller and cost effective airports. We would not like to get into Delhi or Mumbai airports where the revenue models are very high. We would like to make the airport cost effective so that the passengers do not get charged very heavy. We want to make passenger-friendly airport, where they will get best service and most importantly connectivity. Today, if you look at the economy boundary with the world compared to the days of the past, wherever there used to be port, there was development. Today, whichever countries have more airports is bound to develop because of quick connectivity.

NDTV: Apart from tying up with the global players, what will be your internal accrual plans. Are you looking at IPO or debt?

Bharath: Ther are some small legal issues that we have to sort out with certain agencies in few month. It will be in the interest of airport operator to be listed because we will have access to more funds and agencies could give us credit rating. So, we are seriously looking to go for an IPO after some projects. Apart from running the airport, we are in the process of setting up an airport city. It is a full-fledged master plan.and the thrust is to promote the IT industry for the employment of the youth of Kerala and promote tourism.

NDTV: Moving to your non-aeronautical resources that contribute a huge chunk of your revenue profit. How is that worked out for you? Retail seems to be a big chunk of that and duty- free is a huge contribution. So how did you strike that model and what you learned for future airports?

Bharath: For success of the airport, the operating cost should be low and have to rely upon non-aeronautical revenues. The passengers should be given cost-effective price. We heavily relied upon non-aeronautical revenues and one of our greatest success story is the Cochin duty-free. We have been rated as the best duty-free shop in India by a duty-free retailing credit agency. We have leveraged our retail in such a way that it is contributing 45 per cent of our gross revenue.

NDTV: Will that contribution will remain going forward. Do you see it 45 per cent in the future?

Bharath::As of now, it is 42 to 45 per cent, but we want to make it 6 per cent in the next three to four years. We have the vision that by the year 2015, we want to make a landing and parking free airport, which is a very ambitious vision. We will develop it in a joint venture or on a lease. By 2015 to 2020, almost 75 per cent of our revenue will come form the non-aeronautical sources. 

NDTV: Earlier we talked about the high charges, now we have a low-cost airline flying to the Gulf i.e Air Deccan and it has announced its plan to do it very soon. So, are you looking for some kind of alliance with them?

Bharath: Any airlines which will have base operation from Cochin will be given concessions.We can also give discount in landing and parking fee if the model is suitable for us.

NDTV: The recent Hyderabad airport has managed to convince the Andhra government to cut ATF cost and it has come down significantly. Is that going to have an impact in your traffic?

Bharath: It is a bold decision of the Andhra government and it will help the passengers in the long-run. But airport around the Hyderabad will take the biggest hit. All the airlines will have a base around Hyderabad, as the fuelling will be cheaper there. It could also affect 5 to 10 of our revenue. It was a demand from the long time and I think it is a right decision. But the steep cut signifies a monopolistic advantage.

NDTV: Do you see other state governments taking a similar move?