COST BENEFIT ANALYSIS OF SECONDARY AIRPORTS IN

INDIA

SUBMITTED BY: BHARTI GUPTA (17)

KIRANDEEP (31) MONALISA ROY (37)

NADA KAMAL (39)

COST BENEFIT ANALYSISA technique to find, quantify and add all

positive factors is known as benefits.

Then all the negatives, known as costs are identified, quantified and subtracted from it.

The difference between the two indicates whether the planned action is advisable or not.

The real trick in doing a cost benefit analysis is to make sure that one includes all the costs and all the benefits and properly quantify them.

Principles of cost benefit analysis1. There Must Be a Common Unit of Measurement. (The most convenient common unit is money. )

2. Time value of money needs to be considered.

3.The Analysis of a Project Should Involve a With Versus Without Comparison.

4.Double Counting of Benefits or Costs Must be Avoided.

5.Decision Criteria for Projects: discounted present value of the benefits must

exceed the discounted present value of the costs

What are Secondary AirportsA secondary airport can be an airport in addition to an

existing airport in the city that caters to most of the air traffic for long and short-haul flights.

A secondary airport is an airport with all the necessary minimum facilities required for making take-off and landing operations of an aircraft, possible along with required safety and security provisions.

Quite Often, Secondary airports are considered as Low-Cost Airports.

An older airport can be refurbished into secondary airport.

(E.g.: Dallas love field, became the secondary airport after primary operations.)

Objectives of cost benefit analysis for secondary airportsCreate maximum revenue.Increase customer satisfaction.Provide source of entertainment at airport.Provide necessary products and services

mainly for Low Cost Carriers and its users.Enhance the airport image.Create local business opportunities.Create a contemporary concession program.Increase control over concession operations.Privatize management of concessions.

REGULAR PRIVATE AIRLINES AND LOW COST AIRLINES (LCA) SHARE IN THE DOMESTIC PASSENGER TRAFFIC - MAY 2007 (Source: AAI)

Benefits of Secondary AirportsLCCs are provided with smaller airports

with increased opportunities to compete with more established competitors.

Airlines choose to fly from the secondary airport primarily due to the lower price offered by them.

Secondary airports have ‘primary’ catchments areas of their own, for which the secondary airport is much more convenient than the region’s primary airport.

How secondary airports compete with primary airportsProvide alternatives to the major hubs. (hub n spoke)

Compete with the larger hubs because they offer opportunities to by-pass these hubs.

The low-cost airlines and the secondary airports jointly form parallel networks that compete against the routes of the legacy airlines and the major hubs.

WHY LOW COST CARRIERS PREFER SECONDARY AIRPORTS

These are relatively uncongested and thus free from ground and air traffic control delay.

They appreciate the low charges. Lack of congestion, together with work rules

permit fast turn-around times at the gate.Low-cost airlines to increase the flying time

and thus the productivity of their aircraft, and eventually lowering their operating costs significantly.

Integral to their efficiency. 

Competitive situation In India there is no secondary airport that has come into

existence but during the last couple of years the development and reconstruction of a number of regional airports has started in European countries and USA.

These smaller airports will be competing with one another for flights. Since low cost airlines are looking for smaller, inexpensive airports they provide an opportunity for these new regional airports.

This could greatly nourish the development of a given region, so local public administration authorities, such as municipalities are trying to support them financially.

Unfortunately a very limited amount of money is coming from the central public finance institutions. Such airports could promote the trade and tourism in cities and regions that have tourist attractions, plus such towns and areas having airports would be more appealing to investors.

Challenges for secondary airportsAirline service with a palette of features.

 To retain airline service or, at a minimum, to avoid major losses if their airlines withdraw for any reason.

To plan its investments modestly, flexibly, and for the short term until its situation be firmly established.

Secondary airports across the world KUALA LUMPUR

The newly built secondary terminal at Kuala Lumpur opened in March 2006, separated by a considerable distance from the main terminal.

The overall structure of charges is very simple, with no separate charges in force for noise, security or terminal navigation. There is a boarding bridge charge, but it does not apply for the first three hours after an aircraft has arrived, so we have not taken it into account in calculating overall charges.

FRANKFURT-HAHN INTERNATIONAL AIRPORTIt is a former military airfield, and it was

developed primarily for commercial operations by low cost operators.

The airport has a single passenger terminal, so there is no charge differentiation in respect of different facilities.

The landing charge does not apply in the case of aircraft turnarounds which take 30 minutes or less.

Cont…The per passenger charge varies between

€5.35 for up to 100,000 passengers p.a. to €2.48 for between 2,000,001 and 3 million passengers p.a. There are further discounts on further passenger increments beyond 3 million passengers. For our calculations we have contrasted the charges which would apply at a traffic level of 2.5 million passengers, all with a sub-30 minute turnaround, with those which would apply at a traffic level of 2.5 million passengers all of which were subject to a turnaround of over 30 minutes.

COST AND BENEFIT 1.COST TO

OPERATOR

2.COST TO SOCIETY

1.BENEFITS TO STAKEHOLDERS:

OPERATORAIRLINESPASSENGERS

2. BENEFITS TO SOCIETY

COST AND BENEFIT TO THE OPERATORCOSTS BENEFITS

Cost To Meet Safety Security Standards Of IATA And ICAO.

Opportunity Cost.Competition-Handling.Larger Break-even

Period.Difficult To Arrange

Finances Of Such Magnitude .(The estimated cost of building a Low Cost airport is approximately 200 crores)

Generate Additional Revenue By Carbon Emission Trading.

Non-Aeronautical Revenue Generation.

Incentives By Government. (CONCESSIONS, TAX

HOLIDAYS, LANDS AT SUBSIDISED RATES)

Costs and Benefits to SocietyCOSTS BENEFITS

Environmental Issue.

Society will have to compromise on the Level of Services.

Employment Generation.Business opportunities.Economic Development.Increase in income.Reduction in poverty.Increase in literacy rate.Reduction in Carbon

emissions as the problem of Congestion will be solved at primary airports.

Costs and Benefits to PassengerCosts Benefits

Passenger will have to compromise on the level of services.

Time saving.

On time departures and arrivals.

Low fares

Limitations to studyMade all the efforts to reduce the subjectivity

in the research but as the survey was mostly based on human perceptions related to various factors, which may lead to a subjective result.

Due to security reasons entry to the airport was an issue but we made efforts to get the information from passengers and related authorities at the airport.

Time available for the completion of the project was limited. 

THANK YOU !