Business

The Down South white elephant

  • Will parking fee concessions and whatnot address fundamental issues?

By Imesh Ranasinghe

Following the 30-year civil war that ended in 2009, post-war Sri Lanka was on track for development, as the country was united at last. The Mattala airport that commenced construction under the name Mahinda Rajapaksa International Airport (MRIA) in 2009 and the Hambantota Port that was opened in 2010 showed a distorted image of the development Sri Lanka should have focused on at that time.

As a result, today, the Hambantota Port is leased for 99 years to China while MRIA had commenced operations after five years of inactivity, during which it was named the World’s Loneliest Airport by Forbes in 2016.

According to Minister of Tourism Prasanna Ranatunga, since the commencement of operations on 18 March 2013, MRIA had earned only Rs. 445,319,656 as of November 2020, which showed that Sri Lankan taxpayers had to bear losses, along with the losses of  SriLankan Airlines over the last eight to nine years.

According to the Minister, the number of flights operated from the date of opening to November 2020 at MRIA was 10,206. While 23 airlines, including SriLankan Airlines, operated flights during that period, where 58,651 passengers had arrived, the number of departed passengers was 73,513.

Reopening of MRIA in 2020

Speaking to us, Airport and Aviation Services Sri Lanka (AASL) Director of Operations – All Airports and Board Member Shehan Sumanasekara said after five years of inactivity, MRIA resumed operations under the current administration in 2020.

He added that as soon as operations resumed at MRIA, various concessions were approved by the Cabinet and the airport was promoted particularly in the first three months of 2020 before the pandemic hit.

Sumanasekara said that by March 2020, MRIA was promoted as a hub for seafarers to come and transfer to and from vessels that docked at the Galle Port. “So we had a seafarer movement which was a new business for the country,” he said.

The recent cabinet approval for the waiving off of airport immigration tax for years and awarding of discounts on landing and parking charges to international airlines to attract business was a renewal for the decision that was taken last year, targeting the next winter season, he explained.

He pointed out that even though the pandemic hit in 2020, with concessions on the MRIA, it resulted in about 13,900 passenger arrivals.

Further, he said during the winter season in 2020, since the reopening of Sri Lanka to foreign arrivals in December, MRIA had a  huge inflow of Eastern European passengers as a result of promotion activities.

“Airlines such as Ukraine International Airlines, SkyUp Airlines, and Cathay Pacific started coming to Sri Lanka on schedule flights; we actually brought about 7,000 passengers from January to end of  March 2021, which was the highest tourist arrivals to the country even more than BIA, since the airports were reopened for foreign arrivals in December 2020,” he said.

Moreover, he said that following the end of the winter season, MRIA was promoted to Maldivian (airline), IndiGo, and Qatar Airways for charter scheduled flights.

As a result of those promotions, he said that MRIA had 14,950 arrivals as of 25 September 2021 and added that between 22,000 and 25,000 passenger arrivals are expected by the end of 2021 with the upcoming winter season.

“Amidst the pandemic, it is a great feat what we have achieved, which shows the potential MRIA had,” Sumanasekara said.

However, he said since the resumption of its operation in 2020, MRIA never recruited new staff but took in staff from airports in Jaffna and Batticaloa which are not in operation at the moment. Therefore, MRIA currently is staffed at 300, out of which most are security personnel. “We managed with the existing resources, we never wanted to pile up costs,” he said.

Also, he said when operations resumed at MRIA, it was in a very bad state as the previous administration had removed many security machines which were required according to International Civil Aviation Organisation (ICAO) and the International Air Transport Association (IATA) standards that should be maintained in the international airports.

He stressed that the airport authority had to do a lot of work in a short time period to get the airport running again.

Speaking about work-in-progress projects at MRIA, Sumanasekara said that two major airlines will start their operations before the end of 2021 with MRIA; he, however, refused to disclose the names of the two airlines, as the respective airlines wanted to make their own announcement in October.

“We are going ahead with a Maintenance, Repair, and Operations (MRO) facility at the airport. For an airport to be sustainable, certain key strategic drivers need to be available. We are also having a huge cargo warehouse, where the industries will come in and do value addition and processing inside the airport and airlift goods to different countries. Then the next project for MRIA is connecting a hotel to the airport. All three projects are moving forward right now,” he said.

Further, he said that on 14 October, SriLankan Airlines will start a scheduled flight to the Maldives from MRIA, and in December will start flying to Uzbekistan from MRIA.

He added that with many new connections with international airlines to many destinations, the airport authorities are working towards making MRIA a transit hub in the future. However, he said that currently, as the secondary airport in Sri Lanka, MRIA is promoted as a tourist hub as a lot of passengers are terminating their travels in Mattala simply because of the ease to get to the tourist destinations in and around Mattala, such as Ella, Yala, and the east coast, than BIA.

Sumanasekara said that developing an airport is generally a 10-year plan and that MRIA is still at its fourth of operations, as the airport was closed down from 2015 to 2019.

Pointing out the ecosystem developments surrounding MRIA, he said the Hambantota District Development Committee, headed by Minister Namal Rajapaksa, has proposed plans to develop an urban city, IT parks, and other international ventures around Mattala.

Yahapalana and Mattala

Samagi Jana Balawegaya (SJB) MP and former State Minister of Transport and Civil Aviation Ashok Abeysinghe said that although the previous Yahapalana Government brought in new plans regarding MRIA, the Government could not go ahead with them due to various reasons.

Speaking on the controversy about paddy storing at MRIA, he said the then Yahapalana Government was heavily criticised for storing paddy at MRIA. He said the paddy was not stored in the airport terminal but in a cargo building that was 500 m away from the main terminal on a temporary basis.

Due to excess paddy during the Yala season in 2015, 4,000 metric tonnes (MT) of paddy were stored in a cargo building at MRIA in Hambantota, following a request from the Paddy Marketing Board (PMB), stating that there were no adequate storage facilities required to store paddy.

The SJB MP said that MRIA was constructed, spending $ 252 million, while there was a five-year grace period for the repayment of the loan installments between 2010 and 2015, after which the repayments should be made by 2031.

Construction of MRIA started in 2009 at a total estimated cost of $ 209 million. A loan of $ 190 million was obtained from the Exim Bank of China for repayment within 15 years at an interest of 2%, after a grace period of five years.

The balance of $ 19 million was from AASL, and following the project completion, the Government had to pay the contractor a further $ 38.7 million on account of price escalations, cost variations, and interest on delayed payments. Therefore, the total investment in MRIA was $ 252 million.

Abeysinghe said the Civil Aviation Authority had advised the then Mahinda Rajapaksa Government against the construction of the airport due to the lack of a proper feasibility study, the possibility of birds hitting planes, and other factors.

However, with the repayment of the loan in mind, the then Government decided to open MRIA as an airport especially for the people in the South and the East in Sri Lanka who travel to Middle East countries for work and other reasons.

“We planned to open an office of the Sri Lanka Foreign Employment Bureau (SLFEB) in MRIA. We had talks with Fly Dubai to gradually increase the flights to the Middle East and with India to start charter flights from India to MRIA,” he said.

However, he said an initial round of discussions were held in that regard among the Ministries of Foreign Affairs, Labour, and Transport and Aviation, but disagreements among the ministers and problems that came up with the 52-day constitutional crisis in 2018 failed to produce any results.

In the meantime, the former State Minister said that the loan installments for MRIA were paid out of the profits of BIA, as MRIA had only about an income of Rs. 6-7 million a year while the expenses were about Rs. 250 million.

When questioned as to why certain machinery such as security scanners was removed from MRIA, he said that, through one of the former senior officials at the Civil Aviation Authority, he was informed that the security scanners that were installed at MRIA were not working properly, and hence they were removed.

“The scanners were not purchased by the then Mahinda Rajapaksa Government through a proper tender process, and when a gun was placed to test the machine, it was not detected,” he added.

He added that the former Government had discussions with the Indian Government, led by then Minister of Transport and Civil Aviation Arjuna Ranatunga, to operate MRIA as a joint venture.

However, he said the discussions failed due to protests against such a move that arose in the country and due to geopolitical conflict the government would have to deal with, due to China running the Hambantota Port.

The Indian proposal, dated May 2017, states the setting up of a joint venture in which the Indian Government or its assigned entity would hold 70% of equity while the Sri Lankan Government or its assigned entity would hold 30%.

Hard truth behind Sri Lanka aviation industry

A former official in the Sri Lankan aviation industry said a proper feasibility study was not conducted for MRIA before the commencement of construction in 2019.

In 2016, then Deputy Minister of Foreign Affairs Dr. Harsha de Silva revealed that only Rs. 1 million was spent on the feasibility study of MRIA.

This, the former official said, was similar to what happened with the construction of the Hambantota Port, for which a proper feasibility study and return on investment (ROI) analysis were not done by the then Mahinda Rajapaksa Government.

A bird or animal impact assessment too was not done before the construction of MRIA during the initial years of construction and operations, and Sri Lanka Air Force personnel were deployed around MRIA to keep off elephants, the former official said.

The former official added that before the construction of an airport, factors such as wind, weather, and visibility should be studied for a longer period and then decide on the angle the runway should be laid, which is in doubt ever done on the MRIA.

Also, the official said that accommodation for airport staff was not thought out in the plans for MRIA and many of the staff members who went to MRIA had to find accommodations by themselves.

Moreover, the former official added that former Minister of Transport and Civil Aviation Ranatunga had all his close friends and family members put to various institutions and departments under him, due to which he could not get anything done in regard to the MRIA.

India was willing to invest $ 400 million on MRIA for the joint venture with the Government of Sri Lanka, but the negotiation team put forward by the Cabinet was inefficient and was not thorough enough on the subject, the former official alleged.

The former official said that the Indian Foreign Secretary came for the negotiations while the Chairman of the negotiation team, B.M.S Batagoda, who was the former Secretary to the Ministry of Power and Renewable Energy, took the meeting for three hours as he had not studied the whole project prior to the meeting.

When Mumbai International Airport in India covers 900 departures a day with two runways, BIA has only 100-150 departures on peak days, and instead of building another runway with a terminal at BIA, Sri Lanka decided to build another airport in Mattala to accommodate more aircraft, the former official said.

BIA has been in dire need of another terminal for years now. It had more than 170 aircraft movements per day, including an average of more than 60 movements of heavy aircraft per day in 2018. The existing six million passenger terminal handled 10 million passengers in 2018, resulting in hours of delays, particularly as passengers were trying to collect their baggage.

According to the annual reports of AASL, the airport experienced heavy congestion in the arrival and departure zones as well as vehicular traffic, particularly during peak hours; all the while passenger arrivals grew 5-6% Year-on-Year (YoY).

However, the former official said the terminal at BIA, under the second development phase, was being built for over 20 years as former Presidents Chandrika Bandaranaike Kumaratunga and Mahinda Rajapaksa and then Prime Minister kept on changing the designs of the terminal.

It was revealed at Parliament by incumbent Minister of Tourism Ranatunga in December 2020 that the delay of five years in the construction of the roof of the second terminal of BIA, changing the lotus flower roof to a banana leaf by the previous Government, has resulted in a loss of nearly Rs. 31 billion.

In March 2016, the Japan International Co-operation Agency (JICA) signed a loan agreement worth $ 403.75 million with a 40-year repayment period to support the new terminal construction and associated works.

After the current administration took office, the tender for the construction of Terminal 2 was awarded to a consortium of Taisei Corporation and Obayashi Corporation of Japan in 2020.

The project was to consist of the construction of a new multilevel terminal building, Pier No. 2 and Pier No. 3 with a link concourse, new parking apron and taxiways, elevated access roads, multi-storey car park, and public utilities.

It is scheduled to be completed in August 2023, increasing the present passenger handling capacity from 6.5 million to 15 million per annum.

The total cost of the project, comprising the construction cost of Package A and Package B, contingencies, and consultancy services, is $ 550 million with JICA funding.

According to the former official, the best alternative airport for BIA should have been the Jaffna Airport after the war, which would have only cost $ 100 million.

“It would have helped with the development of Jaffna and the entire North after the war and promote trade between Jaffna and Tamil Nadu; although the Government then had plans to develop Jaffna Airport to international standards after the war, it was kept aside,” the former official said.