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Cochin International

Airport Limited

Multi Year Tariff Proposal

FY 2016-17 to FY 2020-21

December 2015

Cochin International Airport Pvt. Ltd.

Multi Year Tariff Proposal FY 17-FY21

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Table of Contents 1. Preamble ............................................................................................................................................... 6

2. Background ........................................................................................................................................... 6

3. Traffic .................................................................................................................................................. 11

Passenger Traffic .................................................................................................................................... 11

Air Traffic Movements ............................................................................................................................ 12

Air Cargo ................................................................................................................................................. 14

4. Capital expenditure ............................................................................................................................. 15

Need for the new International terminal and modification of existing terminals .............................. 15

Parking bays, runway, taxiways and roads........................................................................................... 16

Cargo Facilities ....................................................................................................................................... 17

IT Systems ............................................................................................................................................... 17

CISF residential building ......................................................................................................................... 18

Other Capital Projects ............................................................................................................................ 18

Financing of the new international terminal ........................................................................................ 19

Summary of total capital expenditure ................................................................................................... 19

Capital expenditure for the second control period ............................................................................... 19

5. Allocation of Fixed Assets ................................................................................................................... 21

6. Regulatory Asset Base (RAB) for the Control Period .......................................................................... 23

7. Fair Rate of Return (FRoR) .................................................................................................................. 24

Debt ........................................................................................................................................................ 24

Equity ...................................................................................................................................................... 24

Weighted average gearing .................................................................................................................... 25

Fair Rate of Return (FRoR) ..................................................................................................................... 25

8. Operations and Maintenance Cost ..................................................................................................... 25

Employees’ Cost ...................................................................................................................................... 27

Operational Expenses ............................................................................................................................. 28

Repairs and Maintenance expenses ..................................................................................................... 28

Power, Water and Fuel charges ........................................................................................................... 29

Safety & Security expenses................................................................................................................. 29

Vehicle running and maintenance expenses ....................................................................................... 30

Housekeeping expenses ...................................................................................................................... 30

Consumables expenses ........................................................................................................................ 31



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Other operational expenses ................................................................................................................. 31

CUTE operating expenses ................................................................................................................... 32

Administration and General Cost .......................................................................................................... 32

Summary of Operations and Maintenance expenses ........................................................................... 33

9. Depreciation ........................................................................................................................................ 34

10. Tax on income ................................................................................................................................. 36

11. Non-aeronautical revenues ............................................................................................................ 36

Non-aeronautical royalties, license fees and lease rentals .................................................................. 37

Duty free revenue ................................................................................................................................... 38

Utility service charges ............................................................................................................................ 39

Interest Income ....................................................................................................................................... 39

Other Income .......................................................................................................................................... 39

12. Additional Issues ............................................................................................................................. 40

Contingent liabilities .............................................................................................................................. 40

Cargo tariff filing .................................................................................................................................... 41

Fuel throughput royalty ......................................................................................................................... 41

Ground handling royalty ........................................................................................................................ 41

13. Aggregate Revenue Requirement ................................................................................................... 41

14. Yield Calculation and escalation factor ........................................................................................... 42

15. Conclusion ....................................................................................................................................... 43

16. Annexures ....................................................................................................................................... 43



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List of Tables

Table 1: Ownership structure of CIAL as on 30 November 2015 ................................................................ 7

Table 2: Passenger Traffic at Cochin Airport (million pax) ....................................................................... 12

Table 3: Projected passenger traffic at Cochin International Airport (million) .......................................... 12

Table 4: Growth in Air Traffic Movements at Cochin Airport ................................................................... 13

Table 5: Forecasted number of passengers per ATM at Cochin International Airport ............................... 13

Table 6: Projected air traffic movement at Cochin International Airport ................................................... 13

Table 7: Growth in Domestic Air Cargo handled at Cochin Airport .......................................................... 14

Table 8: Growth in International Air Cargo handled at Cochin Airport ..................................................... 15

Table 9: Projected cargo traffic at Cochin International Airport (MT) ....................................................... 15

Table 10: Total capital expenditure for new international terminal and related works .............................. 16

Table 11: Capital expenditure for roads, runways and culverts .................................................................. 17

Table 12: Major capital expenditure in the second control period .............................................................. 19

Table 13: Estimated Capital expenditure under Single Till ........................................................................ 20

Table 14: Estimated Capital expenditure under Shared Till ...................................................................... 20

Table 15: Aeronautical and non-aeronautical assets allocation basis for existing assets ............................ 21

Table 16: Aeronautical and non-aeronautical assets allocation basis for new assets .................................. 22

Table 17: Aeronautical assets proportion- existing assets .......................................................................... 22

Table 18: Aeronautical assets proportion- new assets ................................................................................ 22

Table 19: Aeronautical assets proportion- total assets ................................................................................ 23

Table 20: Computation of RAB for the control period – Single Till .......................................................... 23

Table 21: Computation of RAB for the control period – Shared Till ........................................................ 23

Table 22: Debt and Cost of debt under Single Till ..................................................................................... 24

Table 23: Debt and Cost of debt under Shared Till ................................................................................... 24

Table 24: Calculation of weighted average gearing – Single Till .............................................................. 25

Table 25: Calculation of weighted average gearing – Shared Till............................................................. 25

Table 26: FRoR computed under various scenario ..................................................................................... 25

Table 27: Proportion of aeronautical expenses ........................................................................................... 26

Table 28: Basis of segregation of O&M cost among aeronautical and non-aeronautical services ............. 27

Table 29: Historical CAGR for employees' cost ......................................................................................... 27

Table 30: Employees’ cost considered under Single Till ........................................................................... 28

Table 31: Employees’ cost for Aeronautical services – Shared Till .......................................................... 28

Table 32: Historical CAGR for Repairs & Maintenance expenditure ........................................................ 28

Table 33: Repairs and maintenance expenses under Single Till ................................................................ 28

Table 34: Repairs and maintenance expenses for Aeronautical services – Shared Till ............................. 28

Table 35: Historical CAGR for power, water and fuel charges .................................................................. 29

Table 36: Power, water and fuel charges under Single Till ........................................................................ 29

Table 37: Power, water and fuel charges for Aeronautical services – Shared Till .................................... 29

Table 38: Historical CAGR for safety & security expenses ....................................................................... 29

Table 39: Safety & security expenses under Single Till ............................................................................. 30

Table 40: Safety & security expenses for Aeronautical service – Shared Till .......................................... 30

Table 41: Historical CAGR for vehicle running & maintenance expenditure ............................................ 30

Table 42: Vehicle running and maintenance expenses under Single Till ................................................... 30



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Table 43: Vehicle running and maintenance expenses for Aeronautical services – Shared Till ............... 30

Table 44: Historical CAGR for housekeeping expenses............................................................................. 30

Table 45: Housekeeping expenses under Single Till .................................................................................. 31

Table 46: Housekeeping expenses for Aeronautical services – Shared Till .............................................. 31

Table 47: Historical CAGR for consumables expenses .............................................................................. 31

Table 48: Consumables expenses under Single Till ................................................................................... 31

Table 49: Consumables expenses for Aeronautical services – Shared Till ............................................... 31

Table 50: Historical CAGR for other operational expenses ....................................................................... 31

Table 51: Other operational expenses under Single Till ............................................................................ 32

Table 52: Other operational expenses for Aeronautical services – Shared Till ......................................... 32

Table 53: CUTE operating expenses .......................................................................................................... 32

Table 54: Historical CAGR for administration expenses ........................................................................... 32

Table 55: Forecast basis for various components of administration expenses ........................................... 33

Table 56: Administrative and general expenses under Single Till ............................................................. 33

Table 57: Administrative and general expenses for Aeronautical services under Shared Till .................. 33

Table 58: Summary of total O&M expenses under Single Till .................................................................. 33

Table 59: Summary of total O&M expenses for Aeronautical services – Shared Till .............................. 34

Table 60: Useful life for certain assets ........................................................................................................ 34

Table 61: Depreciation under Single Till ................................................................................................... 35

Table 62: Depreciation under Shared Till ................................................................................................. 35

Table 63: Tax on income under Single Till ................................................................................................ 36

Table 64: Tax on income under Shared Till .............................................................................................. 36

Table 65: Non aeronautical revenue forecast basis ..................................................................................... 36

Table 66: Non-aeronautical royalties, licensee fees and lease rentals ........................................................ 38

Table 67: Duty free revenues ...................................................................................................................... 38

Table 68: Utility service charges ................................................................................................................ 39

Table 69: Interest income under Single Till ............................................................................................... 39

Table 70: Interest income under Shared Till ............................................................................................. 39

Table 71: Other income .............................................................................................................................. 39

Table 72: Revenue forecast for golf course and other commercial activities ............................................. 40

Table 73: Total Non-aeronautical revenue forecast under Single Till........................................................ 40

Table 74: Total Non-aeronautical revenue forecast under Shared Till ...................................................... 40

Table 75: Aggregate Revenue Requirement under Single Till ................................................................... 41

Table 76: Aggregate Revenue Requirement under Shared Till ................................................................. 42

Table 77: ARR and estimated yield per pax for Single Till ....................................................................... 42

Table 78: ARR and estimated yield per pax for Shared Till ..................................................................... 42



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1. Preamble

Cochin International Airport (also referred as “Cochin airport” or “CIA”) is one of the major

airports notified by Airports Economic Regulatory Authority of India (“AERA” or the

“Authority”) under the provisions of the AERA Act 2008. Pursuant to AERA Act 2008, AERA

issued guidelines for the purpose of determination of aeronautical tariffs for major airports through

its orders1 (“Guidelines”) which are applicable to:

Airport Operators

Service providers for cargo, ground handling, and supply of fuel

Cochin International Airport Limited (CIAL) submitted Multi Year Tariff Proposal (MYTP) for

the first control period from FY2011 to FY2016. Our earlier MYTP submission was made in two

parts. The initial MYTP submission was made in 2011. With elapse of time, AERA had requested

CIAL to update the MYTP submission made in 2011. CIAL submitted the updated MYTP and

ATP in 2014, pursuant to carrying out consultations with airport users in February 2013, on the

proposed new terminal development project. The revised MYTP was submitted along with the

Project Investment File and AUCC report which were prepared in accordance with the provisions

of the AERA Guidelines.

CIAL is now submitting the MYTP for the second control period from FY2017 to FY2021.

2. Background

Cochin International Airport is widely recognized as a low-cost functionally efficient airport. The

airport was operationalized in 1999 and is considered as a pioneering project in India’s aviation

sector.

Passenger traffic grew from 0.2 million in FY 2000 to 6.4 million in FY 2015. In the past 5 years,

traffic has grown at a compounded annual growth rate of 10.2%. Cochin International Airport is

the busiest airport in Kerala and estimated to handle about 12.4 million passengers by FY 2021.

A significant part of air traffic is driven by strong state-domiciled Non-Resident Indian (NRI)

community residing in the Middle East and attractiveness of the state as an international and

domestic tourist destination.

Cochin International Airport is owned and managed by Cochin International Airport Limited

(CIAL) which has a unique ownership structure involving equity contributions from Government

of Kerala, financial institutions, and more than 16,000 individual investors who are mostly non-

resident Keralites (NRKs). The airport is widely recognized as a low-cost functionally efficient

airport in the country. The shareholding pattern of equity investors is shown in the table below –

1 Airports Economic Regulatory Authority of India “Terms and Conditions for Determination of Tariff for Airport

Operators” – Guidelines, Feb 2011;

Airports Economic Regulatory Authority of India (Terms and Conditions for Determination of Tariff for Services

Provided for Cargo Facility, Ground Handling and Supply of Fuel to the Aircraft) Guidelines, January 2011



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Table 1: Ownership structure of CIAL as on 30 November 2015

Equity Partner % Share

Government of Kerala 32.4%

Directors, their relatives and associates 31.7%

BPCL 3.4%

National Aviation Company Limited 3.3%

HUDCO 3.3%

State Bank of Travancore 3.3%

KSIDC, Plantation, KTDFC, KAMCO 1.7%

Federal Bank Limited 2.0%

Indian Overseas Bank 0.3%

Others 18.7%

Total 100%

Rights Issue

In June 2015, CIAL raised about INR 382.6 crore through a rights issue to existing equity

shareholders. About 765 lakh shares of INR 10 face value were offered at a premium of INR 40

per share (issue price of INR 50 per share) in the ratio of 1:4 to the shareholders for raising this

amount.

The objects of the Issue are as follow –

1. CIAL is expanding its terminal capacity by constructing a state-of-the-art 15 lakh square

feet International Terminal building with an anticipated capital outlay of approximately

INR 1000 crore, which will be met from internal accruals, proceeds from rights issue and

debt finance.

2. The object of the issue is to part finance the construction cost of the new International

Terminal Building, other ongoing projects and also for the future expansion &

diversification projects of CIAL.

The Government of Kerala has also subscribed to this rights issues and hence, it would need to be

utilized towards the stated objective. The company is also bound to ensure adequate returns to its

shareholders subscribing to the rights issue including the Government of Kerala.

Pioneering low-cost airport

CIAL has been successful in developing a low cost airport with a relatively low capital

expenditure. This has been made possible through:



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Modular expansion philosophy

Award of multiple contracts competitively tendered as opposed to a single large turnkey

contract

Simple and no-frills development model

Use of locally available materials

Prudent financial management

The said modular approach has led to Cochin International Airport being one of the lowest cost

airports among the major airports in India.

The management of Cochin International Airport has focused on making the airport affordable by

keeping a strict control on costs. Cochin International Airport was developed with a capital

expenditure of approximately INR 300 crore, one of the lowest in the country among comparable

airports with similar capacity. The entire land area of 1,275 acres was acquired at market value,

which is unlike any other privately operated airport in India.

In keeping with its philosophy of being cost efficient in airport development and operations, CIAL

has been able to develop the airport with a comparatively smaller quantum of land as compared to

other major airports. Any major future expansion would require additional land involving

significant expenditure.

It is to be noted that aeronautical tariffs at Cochin Airport have remained unchanged since 2001.

The management has also stuck to its commitment to users to keep the aeronautical charges

unchanged until the commissioning of the new international terminal.

CIAL has clearly demonstrated that it is ahead of its peers in controlling capital costs, and

delivering a functional, no-frills and operationally efficient airport. CIAL believes in efficient

management of resources and expenses. The philosophy of effective cost management can be seen

in Cochin International Airport’s operations as well. The operational expenditure per passenger is

among the lowest at Cochin airport, despite it not having benefits of economies of scale as

compared to other private airports in the country. Notwithstanding the low operational

expenditure, CIAL has ensured high standards of customer service and planned development of

infrastructure facilities in line with this objective.

In August 2015, CIAL became the first airport in the world to be completely operated on solar

power. The 12 MW solar power plant set up on the eastern side of the airport supplies upto 52,000

units per day against an estimated daily consumption of 48,000 per day currently. The solar plant

consists of 46,150 photovoltaic panels spread over 45 acres of land. Two additional plants with

aggregate capacity of 12.4 MW are planned to be set up and are expected to be operational within

the next 12 months. The plant is also the first megawatt scale installation of a solar PV system in

the State of Kerala. The power plant assets are owned and managed by CIAL’s subsidiary, CIAL

Infrastructures Limited (CIL).

CIAL has three wholly-owned subsidiary companies

(i) Cochin International Aviation Services Limited (CIASL)



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(ii) CIAL Infrastructures Limited

(iii) Air Kerala International Services Limited

Cochin International Aviation Services Limited (CIASL)

Cochin International Aviation Services Limited (CIASL) is a wholly owned subsidiary of Cochin

International Airport Limited (CIAL), established in 2006 to create a world-class Maintenance

Repair and Overhaul (MRO) facility in Cochin, India.

CIASL envisions developing this in to a full-fledged Aircraft Maintenance, Repair and Overhaul

facility and is looking for a long-term association with reputed technical partners to provide high

quality services at most competitive cost.

CIASL’s Aircraft Maintenance Organization is presently approved by the DGCA2 to undertake up

to 'A' Checks on Airbus A 320 family aircraft. The AMO is also approved by UAE GCAA and

Sri Lankan CAA and the approval from European Aviation Safety Agency (EASA) is under

process.

Presently, line maintenance services of CIASL is confined to Cochin International Airport. The

Company is proposing to expand its services to Trivandrum and Calicut International Airports

very shortly.

CIASL’s clients include Etihad Airlines, Air Arabia, Sri Lankan Airlines, Emirates, Tiger

Airways and Qatar Airways.

CIAL Infrastructures Limited (CIL)

CIAL Infrastructures Limited (CIL) was incorporated for venturing into power and other

infrastructure projects. CIL has already commissioned a 13 MW solar power plant at the Airport

premises. CIL has also taken steps to implement eight Small Hydro Electric Power (SHEP)

Projects in different locations in the State aggregating to approximately 50 MW, which are in

various stages of progress.

Air Kerala International Services Limited

Air Kerala International Services Limited (AKISL) was set up with the primary objective of

establishing a low cost airline based at Cochin International Airport, to benefit the huge population

of non-resident Keralites in the Middle East. The current policy restriction of Government of India,

requiring Indian carriers to have a fleet of at least 20 aircraft and 5 years of operations in the

domestic market has constrained AKISL from taking the initiative forward. The new draft civil

aviation policy released in October 2015 has proposed easing of restrictions for Indian carriers to

2 Directorate General of Civil Aviation, Government of India



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operate international operations by linking it to domestic flying credits. Once the policy is

approved, AKISL will be able to take this initiative forward.

Need for an appropriate regulatory framework

CIAL has incurred significant capital expenditure for expansion of the airport including

construction of a new international terminal building. Additional capital expenditure is planned to

be incurred during the forthcoming control period in line with the forecasted growth in traffic at

the airport.

While AERA’s Guidelines for tariff determination prescribe a single-till regulatory framework, it

is our humble view that application of the single till tariff regulatory framework as per the

Guidelines would penalize Cochin airport, albeit unintentionally, for being a low-cost, functionally

efficient airport, which has kept aeronautical tariffs unchanged for a continuous period of nearly

15 years. Other private airports such as Delhi, Mumbai, Bangalore and Hyderabad are either

regulated or have got favorable orders/decisions under a shared till framework. The Ministry of

Civil Aviation (MoCA), Government of India has also released the draft National Civil Aviation

Policy which indicates hybrid till framework with 30% cross-subsidy of aeronautical tariffs, as the

way forward.

We would, therefore, like to reiterate that the single-till approach is not the most appropriate for

CIAL and request the Authority to consider Shared Till Regulatory approach as proposed in this

MYTP in the right earnest, which does not compromise the ultimate intent of the purpose of

regulation. This MYTP presents tariff calculations under Single Till and Shared Till regulatory

approaches.

We would like to humbly submit to AERA to adopt Shared Till approach for Cochin International

Airport for the next control period, by reiterating the reasons mentioned earlier:

1. Cochin airport operates in a highly competitive environment with the presence of multiple

international airports, viz. Trivandrum Airport (230 km), Calicut Airport (160 km), proposed

Kannur Airport (270 km), and Coimbatore Airport (170 km) in the vicinity. Competitive

market dynamics and focus on growth would continue to ensure reasonable tariffs for airport

users.

2. CIAL has demonstrated its commitment to keep air travel affordable, without compromising

on timely capacity creation or service quality. With the new international terminal expected to

be commissioned next year, airlines, passengers and other service providers at the airport will

continue to enjoy the high quality of infrastructure and conveniences at the airport at affordable

charges.

3. CIAL has been a pioneer in developing airport infrastructure in Kerala and actively strives to

improve the air travel penetration in the region by keeping the tariffs affordable. CIAL’s

commitment to promote the industry is evidenced by the fact that it has not increased



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aeronautical tariffs since 2001 but has focused on increasing its non-aeronautical revenues and

subsidizing aeronautical tariffs even before the setting up of AERA.

4. It is pertinent to mention that the Government of Kerala holds significant equity in CIAL

(32%). The chairman of the board of directors is the Chief Minister of Kerala while the

executive functions are headed by a senior IAS officer. Thus, on account of the government’s

active involvement in the airport development and operations, safeguarding public interest

would continue to remain a key priority for CIAL.

5. CIAL has been constantly engaging with its users and stakeholders at the airport in all

operational and commercial matters. All commercial contracts with airlines and other service

providers have been negotiated and finalized on a consensual basis, on terms and conditions

that address the concerns and interests of either party.

6. Aeronautical charges at the airport could not have remained low without a conscious effort by

the management to balance the interest of all stakeholders and voluntarily cross-subsidize

airport charges from other aero-related income sources. This is a philosophy that has been

consistently demonstrated by the CIAL management with support from the Government of

Kerala and has stood the test of time.

7. However, we are constrained to seek an increase in tariffs because of the substantial capital

expenditure being incurred towards the new international terminal and other modernization

and capacity enhancement works.

8. We have already completed a formal user consultation process with the AUCC in February

2013 on the new terminal development project and the estimated capital expenditure.

Assets and expenses pertaining to cargo operations have been included as part of this MYTP for

the purposes of aeronautical tariff determination, since cargo assets and operations currently are

currently managed by CIAL.

3. Traffic

Passenger Traffic

Domestic and international passenger traffic has shown a consistent growth since FY 2007 except

for FY 2009, when air traffic demand was impacted by the global financial crisis.

Historical growth in domestic traffic has been driven by a period of sustained increase in per capita

incomes, low air fares, active promotion of Kerala’s tourism industry and increasing business

travel given Kochi’s importance as a business center in Kerala. Growth in international traffic at

Kerala has been primarily driven by NRKs and tourists.



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In FY 2015, Cochin airport was the seventh largest Indian airport in terms of passengers handled.

Passenger traffic has grown at a CAGR of 10.2% for FY 2010-FY 2015. The airport is only behind

Delhi, Mumbai and Chennai by international traffic volumes.

International passenger traffic at Cochin International Airport has increased significantly in FY

2016. During the first half of FY 2016 (April – September), the total passenger traffic has increased

to 3.8 million as compared to 3.1 million during the previous year. Passenger traffic during the full

year FY 2016 is expected to reach 7.9 million. This sudden increase in traffic is as a result of

diversion of traffic from Kozhikode Airport which has been partially closed for renovation. We

expect this increase in traffic, due to diversion from Kozhikode Airport, to be a short-term

phenomenon, and have excluded this increase in our traffic projections for the control period

Table 2: Passenger Traffic at Cochin Airport (million pax)

2011 2012 2013 2014 2015 2016 (estimated) CAGR

Domestic 1.99 2.14 1.97 2.11 2.66 3.23 10.2%

International 2.36 2.59 2.93 3.27 3.74 4.11 1

4.642 11.7%1

Total 4.35 4.73 4.90 5.39 6.40 7.341

7.872 11.0%1

1. Excluding Kozhikode airport diversions

2. Including Kozhikode airport diversions

Passenger traffic is estimated to reach 12.4 million by FY2021. This forecast is based on a growth

rate of 10.2% per annum for domestic passenger and growth rate of 11.7% for international

passenger after adjusting for diversions from Kozhikode.

Passenger traffic for FY 2016 is forecasted based on extrapolation of the half year traffic numbers

after accounting for traffic diversion from Kozhikode. Traffic projections for FY 2017 onwards is

based on historical Compounded Annual Growth Rate (CAGR) for domestic and international

traffic. The international traffic during first half of FY 2017 has been adjusted to account for

diversion from Kozhikode as it is expected that the phenomena will continue during the first half

of FY 2017 as well.

Table 3: Projected passenger traffic at Cochin International Airport (million)

2016 2017 2018 2019 2020 2021 CAGR

Domestic 3.23 3.56 3.92 4.32 4.76 5.25 10.2%

International 4.64 4.85 5.13 5.73 6.40 7.15 11.7%1

Total 7.87 8.41 9.05 10.05 11.16 12.39 11.0%1 1. Excluding Kozhikode diversions

Air Traffic Movements

Domestic ATMs at Cochin International Airport have increased from 23,476 in 2010 to 26,823 in

2015 while international ATMs at the airport have increased from 18,068 movements in 2010 to

25,970 movements in 2015. The ATMs during this period is shown below.



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Table 4: Growth in Air Traffic Movements at Cochin Airport

2010 2011 2012 2013 2014 2015 CAGR

Domestic 23,476 22,600 22,817 21,252 24,082 26,823 2.7%

International 18,068 18,481 18,324 20,286 23,134 25,970 7.5%

Total 41,544 41,081 41,141 41,538 47,216 52,793 4.9%

ATMs at Cochin International Airport has increased significantly in FY 2016. During the first half

of FY 2016 (April - September), the total air traffic movements have increased to 28,334 as

compared to 25,990 during the first half of previous year. ATM traffic during the full year FY

2016 is expected to reach 58,795. This sudden increase in air traffic movements is partially as a

result of diversion of traffic from Kozhikode Airport which has been partially closed for

renovation. We expect this increase in traffic, due to diversion from Kozhikode Airport, to be a

short-term phenomenon, and have excluded this increase in our traffic projections.

ATMs at Cochin International Airport have been forecasted using the forecasts for passenger

traffic (as detailed in the previous section) and forecast of Pax per ATM for domestic and

international airports. Pax/ ATM at Cochin International Airport presently for domestic operations

is 111.3 and for international operations in 155.5. We expect the Pax/ ATM at Cochin International

Airport to increase to 120.3 for domestic operations and to 163.1 for international operations by

FY2021. These estimates of Pax/ ATM have been benchmarked to comparable airports at

Bengaluru and Hyderabad.

The passengers per ATM estimated for the next 5 years at Cochin International Airport is as

follows –

Table 5: Forecasted number of passengers per ATM at Cochin International Airport

FY Domestic

Passengers/ATM

International

Passengers/ATM

2016 111.3 155.5

2017 113.1 157.0

2018 114.9 158.5

2019 116.7 160.0

2020 118.5 161.5

2021 120.3 163.1

Based on number of passengers per ATM and forecasted traffic numbers, the CAGR over FY 2016

to FY 2021 for domestic ATMs is 8.5% and for international ATMs is 9.2% (after adjusting for

diversions from Kozhikode). The projected ATMs at Cochin International Airport for the control

period is shown below.

Table 6: Projected air traffic movement at Cochin International Airport



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2016 2017 2018 2019 2020 2021 CAGR

Domestic 29,011 31,461 34,126 37,027 40,184 43,620 8.5%

International 29,784 30,896 32,336 35,781 39,598 43,825 8.0%

Total 58,795 62,356 66,462 72,808 79,782 87,445 8.3%

The growth in air-traffic and ATMs would require Cochin International Airport to invest in a

secondary runway in the medium to long term. As a low-cost airport operating without government

subsidy or land, Cochin International Airport requires sufficient funds to finance the acquisition

of land and development of secondary-runway. Cochin International Airport needs to plan in

advance for this expansion given the challenges around land acquisition and financing.

Air Cargo

Cochin International Airport handles international and domestic cargo including perishables,

valuables and general cargo. Air cargo traffic has increased from 5,951 Metric Tons (MT) in FY

2002 to 64,940 MT in FY 2015. In the past 5 years, cargo traffic at Cochin International Airport

has grown at a CAGR of 9.4%. Cargo traffic is dominated by exports to Middle East and Europe.

Out of the 64,940 MT of cargo handled in FY 2015, approximately 54,633 MT was Export-Import

(EXIM) cargo.

Air cargo handled at Cochin airport has grown from 41,394 MT to 64,940 MT during FY 2010 –

FY 2015.

Table 7: Growth in Domestic Air Cargo handled at Cochin Airport

MT 2011 2012 2013 2014 2015 2016 CAGR

Outbound 1,921 2,205 2,162 2,150 2,630 2,693 7.0%

Inbound 5,018 5,099 5,196 5,825 7,677 8,346 10.7%

Total Domestic 6,939 7,303 7,358 7,975 10,307 11,039 9.7%

Domestic outbound cargo has been forecasted to grow at a CAGR of 7.0% per annum over base

year FY2016 based on historical CAGR of FY2011 to FY2016. Domestic inbound cargo has been

forecasted to grow at a CAGR of 10.7% per annum over base year FY2016 based on historical

CAGR from FY2011 to FY2016. Total domestic cargo is expected to reach to 17,658 MT by FY

2021.

Cargo traffic at Cochin International Airport has increased significantly in FY 2016. During the

first half of FY 2016 (April - September), the cargo traffic has increased to 38,932 MT as compared

to 34,137 MT during the first half of previous year. Cargo traffic during the full year FY 2016 is

expected to reach 76,876 MT. This sudden increase in cargo traffic, specifically export cargo, is

as a result of diversion of traffic from Kozhikode Airport which has been partially closed for

renovation. We expect this increase in traffic, due to diversion from Kozhikode Airport, to be a

short-term phenomenon, and have excluded this increase in our export cargo traffic projections.



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Additionally, import cargo traffic at Cochin International Airport has fallen from 12,239 MT in

FY 2015 to 4,209 MT (estimated) in FY 2016 due to restrictions imposed on import cargo and

couriers. It is expected that such restrictions would continue and as a result, import cargo would

remain at a lower level as compared to historical levels.

Growth in international cargo is based on the historical CAGR for the period FY2010 – FY2015

as international cargo in FY2016 has increased due to diversions from Kozhikode. Export cargo

has been forecasted to grow at a rate of 10.6% per annum while import cargo has been forecasted

to grow at a CAGR of 4.4% per annum. The total international cargo is expected to reach to 82,775

MT by FY2021.

Table 8: Growth in International Air Cargo handled at Cochin Airport

MT 2010 2011 2012 2013 2014 2015 2016 CAGR1

Export 25,628 24,867 26,183 28,818 33,277 42,394 61,628 10.6%

Import 9,872 9,286 9,358 10,355 13,189 12,239 4,209 4.4%

Total International 35,500 34,154 35,541 39,172 46,465 54,633 65,837 9.0% 1. From FY2010 – FY2015 due to sudden change in FY2016 as a result of diversions from Kozhikode and

restrictions on import cargo

Total cargo at Cochin International Airport is expected to reach to 100,433 MT by 2021.

Table 9: Projected cargo traffic at Cochin International Airport (MT)

2016 2017 2018 2019 2020 2021 CAGR

Domestic

Departure 2,693 2,881 3,082 3,297 3,528 3,774 7.0%

Arrival 8,346 9,241 10,231 11,327 12,540 13,884 10.7%

Total Domestic 11,039 12,122 13,312 14,624 16,068 17,658 9.9%

International

Export 61,628 51,849 57,341 63,413 70,129 77,557 10.6%1

Import 4,209 4,394 4,587 4,789 4,999 5,219 4.4%

Total International 65,837 56,244 61,928 68,202 75,128 82,775 7.2%1

Total 76,876 68,365 75,240 82,826 91,196 100,433 7.5%1 1. CAGR is calculated over a base year FY 2015

4. Capital expenditure

Traffic at Cochin International Airport has increased beyond a level supported by existing

infrastructure. In order to handle increased traffic at the airport, CIAL is developing a new

international terminal and has also planned for additional capacity expansion.

Need for the new International terminal and modification of existing terminals

The existing domestic terminal at Cochin International Airport was constructed in 1999 and has a

design capacity of 800 peak hour passengers (400 embarking and 400 disembarking passengers).

The international terminal has a maximum peak hour handling capacity of 2,400 passenger



16

movements. Currently the peak hour throughput at Cochin International Airport is more than 1,000

passenger movements for domestic operations. The domestic terminal at Cochin Airport is

significantly congested in terms of available area per peak hour passenger when compared to other

major airport terminals in India.

In order to address the capacity constraint at the domestic terminal as well as cater to future growth

in international traffic, CIAL is under process of developing a new international terminal at the

airport. The construction of the new terminal is underway and is expected to be commissioned in

FY 2016-17. The existing international terminal would thereafter be converted to a domestic

terminal, thus enhancing both the domestic and international passenger handling capacity at the

airport. Post expansion, the peak hour passenger handling capacity of the airport is expected to

increase to 3,200 passenger movements for domestic operations and 4,000 passenger movements

for international operations.

The estimated cost of developing the new international terminal at CIA has been benchmarked

with similar airport projects undertaken in India in the last five years. The estimated cost for

development at Cochin Airport is observed to be among the lowest as compared to other airport

expansion/ development projects.

CIAL has conducted consultations with the Airport Users Consultative Committee (AUCC) on the

proposed project as per guidelines of AERA and the report has been duly forwarded to AERA and

thereafter the construction of new terminal was commenced on 1st February 2014.

The total capital expenditure envisaged for the new terminal development is INR 1101.3 Cr

(including related infrastructure and costs already incurred in FY15 which amounts to INR 195.6

Cr). Capital expenditure on modification of existing terminals is estimated at INR 54.7. CIAL has

maintained strict control on capital expenditure for the terminal. The capital expenditure of the

new terminal is the lowest among comparable airports in the country.

Table 10: Total capital expenditure for new international terminal and related works

Particulars FY 15 WIP 2016 2017 2018 2019 2020 2021

Buildings & Civil Works 169.8 299.9 58.0 0.0 0.0 0.0 0.0

Runway, Roads and

Culverts

16.7 130.0 32.2 0.0 0.0 0.0 0.0

Plant and Equipment 6.0 205.4 124.2 18.1 18.5 0.3 0.3

Computers and

Accessories

3.0 13.5 4.3 0.0 0.0 0.0 0.0

Office Equipment 0.0 0.0 1.1 0.0 0.0 0.0 0.0

Total 195.6 648.8 219.8 18.1 18.5 0.3 0.3

Parking bays, runway, taxiways and roads

In line with airport expansion and new terminal development, the corresponding air-side

infrastructure is being augmented to support increased traffic at Cochin International Airport. The

major projects during FY2017 – 21 include development of approach roads, railway over bridge,



17

ring road, flood control measures, 0-9 CAT approach, service road, parking bays reconfiguration

works, runway re-carpeting & code F correction, rapid exit & vertical link and construction of

additional parking bays.

The total capital expenditure on parking bays, taxiways, runway and roads is estimated at INR

508.1 Cr from FY2016 to FY2021.

Table 11: Capital expenditure for roads, runways and culverts

Particulars 2016 2017 2018 2019 2020 2021

Construction of Approach road 31.8 22.2 0.0 0.0 0.0 0.0

Construction of ROB 8.2 5.8 0.0 0.0 0.0 0.0

Service road 0.0 8.6 7.8 0.0 0.0 0.0

0-9 ILS 0.0 7.5 0.0 0.0 0.0 0.0

Ring road, Chengal Thodu bridge 0.0 5.4 0.0 0.0 0.0 0.0

Ring road phase II 0.0 0.0 0.0 5.8 0.0 0.0

Flood Control Measures 0.0 0.0 4.4 0.0 0.0 0.0

Reconfiguration works of bay 1,2,3 0.0 0.0 0.0 40.3 0.0 0.0

Recarpeting and Code F Correction 0.0 0.0 0.0 111.7 89.5 0.0

Rapid Exit & Vertical Link 0.0 0.0 16.7 17.3 0.0 0.0

Construction of parking bays phase II 0.0 0.0 0.0 0.0 25.1 100.1

Total 40.0 49.41 28.9 175.1 114.6 100.1 1. Difference is due to rounding off

Cargo Facilities

Total cargo at Cochin International Airport is expected to reach to 100,433 MT by 2021. A new

integrated export warehouse is planned to process export cargo which would expedite cargo

handling and increase efficiency. CIAL is also planning investments in automation of the new

integrated export warehouse.

New integrated export warehouse will have following facilities - handling area of 15,000 Sq m,

truck docks with dock levelers, parking area, work stations with ULD weighing arrangement, ULD

Racking system with ETV to store loaded ULDs, DG handling room for storage and Handling,

Radio Active room which will be certified by BARC, Staff Rooms and Document Storage Area,

Information Centre, TSP counters, strong room, customs, PQ and CIAL offices.

The total capital expenditure for new integrated export warehouse is estimated at INR 68 cr and

on automation of export warehouse is INR 57 cr. Other cargo related capital expenditure is

estimated at INR 6 Cr.

IT Systems

At Cochin International Airport, till FY2016, SITA was the service provider for CUTE related

services. CUTE, CUSS, BRS Systems have reached End-of-Life as well as End-of Support and

have to be replaced with new systems (hardware and software application) in line with the

technology trends and hence required additional capital expenditure. Under a revised business



18

model CIAL has decided to incur capital expenditure and handle CUTE operations at Cochin

International Airport.

CUTE, CUSS and BRS

CIAL had so far outsourced the activities of Common User Terminal facilities (CUTE), Baggage

Reconciliation Service (BRS) and Common User Self Services (CUSS) to M/s SITA, which pays

a royalty of USD .41 per departing passenger to CIAL. M/s SITA has agreements with all airlines

for rendering these service at a rate of USD 1.25 per departing passenger. The current contract

between CIAL and M/s SITA will expire on 31.12.2015.

CIAL proposes to render CUTE, CUSS and BRS directly to airlines with effect from 01-01-2016.

The capital and operating expenditure for provision of these services will be incurred by CIAL.

M/s SITA has been awarded the contract through a competitive tendering process for supply,

installation and commissioning of the hardware, software and equipment for remote connectivity

services. M/s SITA will also provide operations and maintenance of the CUTE, CUSS and BRS

facilities. (Copy of agreement 26-06-2015 marked in Annexure 2)

CIAL will enter into agreements with various airlines for providing CUTE, CUSS and BRS

services from 01-01-2016. A draft agreement has been shared with various airlines.

The total capital expenditure envisaged for CUTE services provisioning is INR 27 Cr.

Other IT systems related capital expenditure includes computers, servers, hardware, software,

renovation of existing international terminal IT infrastructure, E-Gate, Data center revamping,

replacement of existing FIDS and PAS, Parking management system, networking systems and

replacement of arrival conveyor.

The total IT systems capital expenditure including CUTE from FY 2016 to FY 2021 is estimated

at INR 96 Cr.

CISF residential building

CISF has requested for development of residential building for staff working at Cochin

International Airport. The total capital expenditure for CISF residential building is estimated at

around INR 74 Cr.

Other Capital Projects

Capital expenditure on family entertainment center is estimated at INR 282 Cr and capital

expenditure for commercial complex is estimated at INR 41 Cr. The maintenance capital

expenditure for the second control period is estimated at INR 207 Cr.

Other capital projects at Cochin International Airport during FY2016 – 21 include ground handling

equipment, alternate water source for airport, office building for regulatory agency, ground support

building, GSE building, furniture, office equipment and commercial buildings. The total capital

expenditure on these projects is estimated at INR 389 Cr from FY 2016 to FY 2021.



19

Financing of the new international terminal

Altogether 37 work packages are awarded towards this project. So far project works amounting

INR 345 crore (as on 17.11.2015) is completed and the balance will works/packages are expected

to be completed within the schedule completion date of May 2016. The total value of packages so

awarded for new international terminal is 762 crore and apart from that other allied infrastructure

development for new terminal such as elevated road, new road, ulility, Apron, Car park etc are

also awarded for an amount of INR 280 crore.

CIAL has entered into an agreement with M/s Federal Bank for a term loan of INR 500 crore at a

floating rate equivalent to the Bank’s Base Rate. The current Base Rate of Federal bank 9.95%.

The moratorium period as per the loan agreement is three (3) years from the date of the first

disbursement of the loan, which is March 2015. The repayment of the loan will be made in forty

(40) equal quarterly instalments commencing from January 2018. The details are given in the loan

agreement attached in Annexure 1.

As on date, CIAL has availed INR 146.56 crore of debt from this term loan facility towards capital

expenditure for the new international terminal. Remaining capital expenditure related to new

international terminal to be financed through rights issues and internal accruals.

Summary of total capital expenditure

Capital expenditure on aeronautical assets has been considered under the shared till approach.

The maintenance capital expenditure to be incurred for the maintenance and enhancement works

is apportioned to various assets heads (Buildings & civil works, Runway, roads and culverts, plant

& Equipment, office equipment, furniture and fixtures, vehicles and intangible assets based on the

gross block ratio.

Capital expenditure for the second control period

Total Capital Expenditure planned for the next control period (FY2017 – 21) is around 1954 cr.

Major capital expenditure projects planned/ underway at Cochin International Airport are –

New terminal for international operations

Modification of existing terminals

Parking bays, runway, taxiways and roads

Planning for Secondary runway

Cargo facilities

IT Systems

CISF Residential Building

Other capital projects

Table 12: Major capital expenditure in the second control period

2017 2018 2019 2020 2021 Total

New International

Terminal 219.8 18.1 18.5 0.3 0.3 257.0



20

2017 2018 2019 2020 2021 Total

Modification of

existing terminals 54.7 0.0 0.0 0.0 0.0 54.7

Parking bays, runway,

taxiways and roads 49.4 28.9 175.1 114.6 100.1 468.1

Cargo Facilities 0.3 47.0 84.1 0.0 0.0 131.3

IT Systems 30.3 8.3 13.2 13.7 1.9 67.4

CISF Residential

Building 0.0 0.0 0.0 0.0 74.4 74.4

Other Capital Projects 124.8 124.8 36.8 188.0 219.8 694.2

Maintenance Capital

expenditure 0.0 0.0 0.0 95.5 111.3 206.8

Total 479.2 227.2 327.8 412.0 507.8 1954.0

The capital expenditure on ongoing-projects in FY 2016 is around INR 735 Cr. The estimated

year-wise capital expenditure under single till and shared till for FY2017 – 21 has been set out in

the following tables –

Table 13: Estimated Capital expenditure under Single Till

Particulars 2017 2018 2019 2020 2021

Buildings & Civil Works 139.3 89.0 58.3 119.3 169.6

Golf Course Development 0.0 0.0 0.0 0.0 0.0

Runway, Roads and Culverts 76.2 28.9 138.2 113.4 98.9

Plant and Equipment 202.3 93.3 122.5 79.2 117.7

Office Equipment 13.1 0.7 0.8 0.8 0.9

Computers and Accessories 38.3 11.9 5.4 1.3 5.3

Furniture and Fixtures 6.7 1.1 1.2 1.3 1.4

Vehicles 1.8 1.1 0.6 0.4 1.2

Intangible assets 1.4 1.2 0.8 0.9 1.5

Maintenance capital

expenditure 0.0 0.0 0.0 95.5 111.3

Total Capital expenditure 479.2 227.2 327.8 412.0 507.8 1. Small differences due to rounding off

Table 14: Estimated Capital expenditure under Shared Till

Particulars 2017 2018 2019 2020 2021








Vehicles 1.8 1.1 0.6 0.4 1.2



21

Particulars 2017 2018 2019 2020 2021


Maintenance capital

expenditure 0.0 0.0 0.0 95.5 111.3

Total Capital expenditure 426.5 187.9 326.6 270.9 364.0

5. Allocation of Fixed Assets

The definition of RAB in the AERA Guidelines 2011 does not require segregation of assets into

aeronautical and non-aeronautical assets for the single till scenario. However, for shared till,

segregation of aeronautical and non- aeronautical assets has been done.

Table 15: Aeronautical and non-aeronautical assets allocation basis for existing assets

Existing Assets Basis for segregation

Land

Existing land as on FY 2015 has been segregated based on the land

usage by aeronautical and non-aeronautical activities. The land

utilization details have been mentioned in Annexure 3.

Buildings and civil works

Existing buildings & civil works assets as on FY 2015 have been firstly

divided into terminal buildings and non-terminal buildings. Terminal

building assets have been apportioned based on aeronautical and non-

aeronautical area in the existing terminals. For buildings outside

terminals, actual aeronautical & non-aeronautical classification has

been done for each assets.

Golf course development Golf course development assets as on FY 2015 have been considered

as non-aeronautical assets.

Runway, roads and

culverts

Existing runway, roads and culverts as on FY 2015 have been

considered as aeronautical assets.

Plant and equipment

Existing plant and equipment assets as on FY 2015 have been

segregated based on aeronautical and non-aeronautical area in the

existing terminals.

Office equipment

Existing office equipment assets as on FY 2015 have been segregated

based on aeronautical and non-aeronautical area in the existing

terminals.

Computers and

accessories

Existing computers and accessories assets as on FY 2015 have been


existing terminals.

Furniture and fixtures

Existing furniture and fixtures assets as on FY 2015 have been


existing terminals.

Vehicles Existing vehicles as on FY 2015 have been segregated based on

aeronautical and non-aeronautical area in the existing terminals.

Intangible assets Existing intangible assets as on FY 2015 have been segregated based

on aeronautical and non-aeronautical area in the existing terminals.



22

Table 16: Aeronautical and non-aeronautical assets allocation basis for new assets

Table 17: Aeronautical assets proportion- existing assets

Existing Assets as on FY 2015 Amount Aeronautical Non-aeronautical

Land 125.0 89.1% 10.9%

Buildings & Civil Works 176.8 76.0% 24.0%

Golf Course Development 26.6 0.0% 100.0%

Runway, Roads and Culverts 213.9 100.0% 0.0%

Plant and Equipment 161.6 92.4% 7.6%

Office Equipment 0.5 92.4% 7.6%

Computers and Accessories 6.1 92.4% 7.6%

Furniture and Fixtures 6.2 92.4% 7.6%

Vehicles 6.3 92.4% 7.6%

Intangible assets 9.2 92.4% 7.6%

Total Gross Block 732.1 86.7% 13.3%

Table 18: Aeronautical assets proportion- new assets

New Assets capitalized from FY 2016

to FY 2021

Amount Aeronautical Non-aeronautical

Land 0.0 0.0% 0.0%








Vehicles 6.6 100.0% 0.0%


Total Capitalization 2821.8 83.8% 16.2%

New Assets Basis for segregation

New International Terminal

New international terminal assets (Buildings & civil work, runway,

roads & culverts, plant & equipment, office equipment, computers

& accessories, furniture & fixtures, vehicles and intangible assets)

have been apportioned based on average aeronautical and non-

aeronautical area in the new international terminal.

Other than new international

terminal assets

Actual asset wise aeronautical and non-aeronautical classification

has been carried out for assets other than new international terminal

(Buildings & civil work, runway, roads & culverts, plant &

equipment, office equipment, computers & accessories, furniture &

fixtures, vehicles and intangible assets).



23

Table 19: Aeronautical assets proportion- total assets

Total assets as on FY 2021 Amount Aeronautical Non-aeronautical

Land 125.0 89.1% 10.9%








Vehicles 13.0 96.3% 3.7%


Total Capitalization 3553.9 84.4% 15.6%

6. Regulatory Asset Base (RAB) for the Control Period

Estimated closing book value of net block for FY 2016 forms the opening RAB for the first year

of the control period i.e. FY 2017. The assets capitalized during the year have been added to the

opening RAB and adjusted for depreciation charged during the year to arrive at closing value of

RAB. Average of opening and closing RAB has been considered for computation of tariffs. The

details of RAB for the control period are as follows:

Table 20: Computation of RAB for the control period – Single Till

INR crore FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Opening RAB 437.9 1846.2 1889.6 2059.1 2272.6

Less: Depreciation during year 78.1 128.1 141.9 156.7 172.1

Add: Capitalization during the year 1486.4 171.4 311.4 370.2 614.5

Sales/transfer 0 0 0 0 0

Closing RAB 1846.2 1889.6 2059.1 2272.6 2714.9

Average RAB 1142.1 1867.9 1974.3 2165.8 2493.8

Table 21: Computation of RAB for the control period – Shared Till


Opening RAB 366.9 1518.4 1549.0 1684.3 1887.4

Less: Depreciation during year 69.1 114.4 126.9 140.5 155.0

Add: Capitalization during the year 1220.6 145.0 262.2 343.6 505.4

Sales/transfer 0 0 0 0 0

Closing RAB 1518.4 1549.0 1684.3 1887.4 2237.8

Average RAB 942.7 1533.7 1616.6 1785.9 2062.6



24

7. Fair Rate of Return (FRoR)

Fair Rate of Return (FRoR) has been calculated as per Tariff Guidelines. The computation of FRoR

has been done as below

FRoR = g*Rd + (1-g)*Re

Where: g = Weighted Average Gearing for the control period

Rd = Weighted Average Pre-Tax Cost of Debt for the control period

T= Corporate Tax Rate

Re = Post-Tax Cost of Equity.

Debt

To fund the capital expenditure in the second control period, CIAL is raising debt year on year

from the banks. The weighted average cost of debt (Rd) for the control period is 9.95%, computed

from the outstanding debt and yearly average cost of debt as given below:

Table 22: Debt and Cost of debt under Single Till

Particulars FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Outstanding debt (INR crore) 547.7 586.5 705.3 868.1 1074.6

Cost of Debt - % 9.95% 9.95% 9.95% 9.95% 9.95%

Table 23: Debt and Cost of debt under Shared Till


Outstanding debt (INR crore) 513.9 513.9 588.4 692.2 828.2

Cost of Debt - % 9.95% 9.95% 9.95% 9.95% 9.95%

Equity

Cost of equity for CIAL has been considered to be 16% as is considered by AERA for other major

airports. AERA is requested to consider higher cost of equity in case of CIAL because of following

reasons:

a. During the initial years, the returns to CIAL’s investors have not matched the expected RoE

because of perpetual low tariffs that have benefited the users

b. CIAL will also need to acquire additional land and fund the same which is not provided for

under the guidelines for tariff determination. Cochin International Airport needs to plan in

advance for the airport expansion given the challenges around land acquisition and financing.

It is requested that at least 20% Cost of Equity must be considered in case of CIAL.



25

Weighted average gearing

Capital Expenditure during the second control period would be financed through existing cash

with CIAL, funds generated through business operations and fresh debt.

Weighted average gearing as calculated below is 35.0% (Single Till), and 28.8% (Shared Till).

Future capital expenditure is expected to be funded through debt given the challenge for CIAL to

raise fresh equity due to large number of shareholders.

Table 24: Calculation of weighted average gearing – Single Till


Debt 547.7 586.5 705.3 868.1 1074.6

Equity Share Capital 688.6 688.6 688.6 688.6 688.6

Reserves and Surplus 538.3 605.0 690.6 802.1 946.5

Total 1774.7 1880.2 2084.6 2358.9 2709.6

Gearing 30.9% 31.2% 33.8% 36.8% 39.7%

Weighted average gearing 35.0%

Table 25: Calculation of weighted average gearing – Shared Till


Debt 513.9 513.9 588.4 692.2 828.2

Equity Share Capital 688.6 688.6 688.6 688.6 688.6

Reserves and Surplus 581.3 693.8 819.3 991.4 1208.2

Total 1783.8 1896.3 2096.3 2372.2 2725.0

Gearing 28.8% 27.1% 28.1% 29.2% 30.4%

Weighted average gearing 28.8%

Fair Rate of Return (FRoR)

The Fair Rate of Return for the control period is estimated at 13.9% (single till) and at 14.3%

(shared till) as shown in the following table.

Table 26: FRoR computed under various scenario

Particulars Single till Shared till

Weighted average cost of debt 9.95% 9.95%

Cost of Equity 16.0% 16.0%

Weighted average gearing 35.0% 28.8%

FRoR 13.9% 14.3%

8. Operations and Maintenance Cost

CIAL has been cost effective in managing the airport. Its operational expenditure per passenger is

relatively lower as compared to some other major airports. Notwithstanding the low operational



26

expenditure, CIAL has always ensured that customer service is always of high standards and has

planned airport development in line with this objective. As a no-frills airport, Cochin International

Airport has maintained consistent levels of service quality.

The Operation and Maintenance (O&M) cost mainly consists of the employee costs, repairs &

maintenance cost, utilities costs, other operational expenditure costs, administration and general

costs. Actual half year figures for FY2016 has been used to forecast the Operations and

maintenance cost for the second control period (FY 2017 to FY 2021). While estimating future

operations and maintenance costs, the relevant costs drivers such as inflation, increase in terminal

area, increase in manpower and increased passenger traffic have been taken into account.

In the single till, since all the assets are part of the RAB, entire O&M cost is considered while

calculating ARR. However, in case of shared till, O&M cost has been apportioned towards

aeronautical and non-aeronautical categories based on the cost incidence.

The proportion of aeronautical O&M expenses for the period FY 2016-17 to FY 2020-21 is

presented in table below –

Table 27: Proportion of aeronautical expenses

2017 2018 2019 2020 2021

Operational Expenses

Total Repairs Costs 86.1% 86.1% 86.1% 86.1% 86.1%

Safety & Security expenses 96.1% 96.1% 96.1% 96.1% 96.1%

Power Charges 97.7% 97.7% 97.7% 97.7% 97.7%

Water Charges 97.7% 97.7% 97.7% 97.7% 97.7%

Fuel Generator Sets 97.7% 97.7% 97.7% 97.7% 97.7%

Vehicle R&M expenses 96.1% 96.1% 96.1% 96.1% 96.1%

House Keeping expenses 96.1% 96.1% 96.1% 96.1% 96.1%

Consumables 96.1% 96.1% 96.1% 96.1% 96.1%

Other operational expenses 96.1% 96.1% 96.1% 96.1% 96.1%

CUTE operational expenses 100.0% 100.0% 100.0% 100.0% 100.0%

Total Operational expenses 94.7% 94.8% 94.6% 94.3% 94.1%

Payment to employees 96.1% 96.1% 96.1% 96.1% 96.1%

Admin Expenses 96.1% 96.1% 96.1% 96.1% 96.1%



27

The basis of segregation of O&M expenditure into aeronautical and non-aeronautical is given in

the table below:

Table 28: Basis of segregation of O&M cost among aeronautical and non-aeronautical services

WPI, for the purposes of escalation, has been assumed to be 3.6% per annum as per as RBI's

“Results of the Survey of Professional Forecasters on Macroeconomic Indicators” – 36th Round

(Q2:2015-16).

USD to INR exchange rate has been considered as an average rate exchange rate for August 2015

as per RBI data.

The detailed assumptions and rationale for each element of O&M cost is described below:

Employees’ Cost

Employees’ cost constituted approximately 26.75 % of total O&M costs in FY 2015

The cost incurred towards employees in a year is determined by the headcount and the average

compensation per employee. Historically, the CAGR for employees’ cost is shown below:

Table 29: Historical CAGR for employees' cost

FY15 (INR Cr) CAGR (2010-2015) CAGR (2005-2015)

Total employee cost 54.7 9.9% 24.8%

O&M expense head Basis for segregation of O&M cost

Employee cost

Total employee cost has been segregated into aeronautical and non-

aeronautical in the proportion of number of employee providing

aeronautical and non-aeronautical services. Employees working in

commercial department, duty free department and golf course have been

considered as employees providing non-aeronautical services.

Administration and

General costs

Segregated into aeronautical and non-aeronautical in the proportion of

number of employee providing aeronautical and non-aeronautical services.

Utilities Costs Power, water and fuel charges have been prorated in the proportion of

actual usage by aeronautical activities and non-aeronautical activities

Repair and

maintenance costs

Repair and maintenance costs have been prorated in the proportion of gross

block for aeronautical and non-aeronautical assets for buildings, runway,

roads & culverts and plant & equipment.

Other operational

expenses

These expenses pertain to safety & security expenses, vehicle operations &

maintenance, housekeeping expenses, consumables and other

miscellaneous expenses. Expenses have been segregated in the proportion

of number of employee providing aeronautical and non-aeronautical

services.

CUTE expenses CUTE operational expenses incurred are considered to be aeronautical

expenses.



28

Average compensation per employee is increased by 10% year on year and the average pay is

revised every 5 years by 50%. The 5 yearly revision in salary is assumed during year 2018.

The new international terminal will be commissioned in FY 2017 and the increase in employee

strength on account of airport expansion has been considered for forecasting the employees’ cost.

For new employees, the grade wise segregation is considered to forecast the payroll costs. Total

47 new employees are to be added in FY 2017 on account of commissioning of new international

terminal.

Table 30: Employees’ cost considered under Single Till

INR Cr FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Employees Cost 62.6 94.0 103.3 113.7 125.0

Table 31: Employees’ cost for Aeronautical services – Shared Till


Employees Cost 60.2 90.3 99.4 109.3 120.2

Operational Expenses

Operational expenses constituted approximately 27.22 % of total O&M costs in FY 2015

Repairs and Maintenance expenses

Repairs and maintenance expenses for buildings, roads runways & culverts and plant & equipment

have been forecasted basis % of gross block based on historical trends and technical estimates for

new assets.

Historically, the CAGR for repairs and maintenance expenses is shown below –

Table 32: Historical CAGR for Repairs & Maintenance expenditure


R&M expenses 11.4 16.2% 14.7%

Table 33: Repairs and maintenance expenses under Single Till


Total Repairs Costs 18.2 22.9 29.1 36.6 42.9

Table 34: Repairs and maintenance expenses for Aeronautical services – Shared Till


Total Repairs Costs 15.7 19.8 25.0 31.5 37.0



29

Power, Water and Fuel charges

Power, water and Fuel charges have been forecasted based on growth drivers such as increase in

terminal area and WPI as explained below. Historically, the CAGR for power, water and fuel

charges is shown below –

Table 35: Historical CAGR for power, water and fuel charges


Power, water and fuel

charges 16.6 15.0% 16.0%

Total power units consumed in the most recent audited year have been apportioned to various cost

centers such as international terminal, domestic terminal, city-side & air-side facilities, cargo and

other activities.

Terminal power unit consumption has been increased as per increase in terminal area accounting

for historical growth rate. City side & airside facilities power consumption increased

proportionately as per the airport expansion on account of new international terminal. Power

consumption by other cost centers has been increased by historical growth rate.

Water units for FY 2017 have been increased on account of the airport expansion. FY 2018

onwards, water units have been increased by 10%. Out of total water units required, CIAL will

generate 6 lakhs units per day through internal sources and remaining water units will be supplied

by Kerala Water Authority. Water unit rate has been increased by 25% after every three years.

Fuel generator charges have been increased by 5% year on year basis.

Table 36: Power, water and fuel charges under Single Till


Power, water and fuel charges 30.6 44.7 49.7 54.4 59.6

Table 37: Power, water and fuel charges for Aeronautical services – Shared Till


Power, water and fuel charges 29.9 43.7 48.5 53.2 58.3

Safety & Security expenses

Safety and security expenses have been forecasted based on historical growth rates and increase

in terminal area. Historically, the CAGR for Safety & security expenses is shown below –

Table 38: Historical CAGR for safety & security expenses


Safety & security expenses 3.0 19.3% 37.3%



30

Safety and security expenses has been increased by 100% on account of increase in terminal area

due to commissioning of new international terminal. After commissioning of new international

terminal, expenses have been increased by historical CAGR of FY12 to FY15.

Table 39: Safety & security expenses under Single Till


Safety & Security expenses 4.5 6.4 6.8 7.3 7.8

Table 40: Safety & security expenses for Aeronautical service – Shared Till


Safety & Security expenses 4.3 6.1 6.6 7.0 7.5

Vehicle running and maintenance expenses

Vehicle running and maintenance expenses have been forecasted based on the historical growth

rates. Historically, the CAGR for vehicle running and maintenance expenses is shown below –

Table 41: Historical CAGR for vehicle running & maintenance expenditure


Vehicle R&M expenses 1.3 4.3% 14.4%

Table 42: Vehicle running and maintenance expenses under Single Till


Vehicle R&M expenses 0.9 1.0 1.1 1.3 1.4

Table 43: Vehicle running and maintenance expenses for Aeronautical services – Shared Till


Vehicle R&M expenses 0.9 1.0 1.1 1.2 1.3

Housekeeping expenses

Housekeeping expenses have been projected based on growth drivers such as historical trends,

increase in terminal area and CPI. Historically, the CAGR for housekeeping expenses is shown

below –

Table 44: Historical CAGR for housekeeping expenses


Housekeeping expenses 5.3 25.3% 38.0%



31

Housekeeping expenses have been increased by 100% on account of new international terminal

commissioning. After commissioning of new international terminal, housekeeping expenses have

been increased by 4% over CPI.

Table 45: Housekeeping expenses under Single Till


Housekeeping expenses 11.0 17.5 19.0 20.7 22.5

Table 46: Housekeeping expenses for Aeronautical services – Shared Till


Housekeeping expenses 10.6 16.8 18.3 19.9 21.6

Consumables expenses

Consumables expenses have been projected based on growth drivers such as historical trends,

increase in terminal area and CPI. Historically, the CAGR for consumables expenses is shown

below –

Table 47: Historical CAGR for consumables expenses


Consumables expenses 2.8 44.1% 29.4%

Consumables expenses have been increased by 100% on account of new international terminal

commissioning. After commissioning of new international terminal, consumables expenses have

been increased by CPI.

Table 48: Consumables expenses under Single Till


Consumables 3.2 6.5 6.8 7.1 7.4

Table 49: Consumables expenses for Aeronautical services – Shared Till


Consumables 3.1 6.2 6.5 6.8 7.2

Other operational expenses

Other operational expenses have been increased by the historical growth rates. Historically, the

CAGR for other operational expenses is shown below –

Table 50: Historical CAGR for other operational expenses



32


Other operational expenses 6.9 43.4% 42.8%

Table 51: Other operational expenses under Single Till


Other operational expenses 9.8 9.3 9.9 10.7 11.7

Table 52: Other operational expenses for Aeronautical services – Shared Till


Other operational expenses 10.2 9.8 10.3 11.5 12.6

CUTE operating expenses

From FY 2016-17 onwards, CIAL is changing the business model for CUTE services and will

handle the services itself. CUTE expenses have been forecasted based on annual maintenance and

support fees to be paid by CIAL to SITA as per existing agreement.

Table 53: CUTE operating expenses


CUTE expenses 3.8 3.9 4.1 4.3 4.4

CUTE operating expenses have been considered as aeronautical expenses. The copy of agreement

with SITA is marked in Annexure 2.

Administration and General Cost

Administration and general costs constituted approximately 4.01 % of total O&M costs in FY 2015

Different components of administrative and general costs have been projected based on relevant

drivers like historical CAGR, inflation (WPI), an increase in terminal area and as % of gross block.

Historically, the CAGR for administration & general cost is shown below:

Table 54: Historical CAGR for administration expenses


Administration & General

expenses 8.2 0.9% 4.3%



33

Table 55: Forecast basis for various components of administration expenses

Administration Expenses Forecast basis

Repairs to office

equipment

Repairs to office equipment has been forecasted as 10% of gross block

of office equipment based on the internal technical estimates.

Rent Rent charges has been increased by 10% growth year on year as per

the relevant agreements

Rates and Taxes Rates and taxes increased by the increase in terminal areas

Printing and Stationery Printing and stationery expenses have been forecasted accounting

inflation

Telephone, Postage and

Communication

Telephone, postage and communication expenses increased by a

CAGR over a period from FY 2011 to FY 2015

Travelling expense Travelling expenses increased by a CAGR over a period from FY 2011

to FY 2015

Insurance Insurance expenses have been projected using historical % of gross

block estimates

Advertisement duty free Duty free advertisement expenses have been forecasted as an average

of last 5 years’ expenses as a % duty free sales

Bank charges Forecast was done as an average of last 5 years’ actual expenses as a

% of total expenses

Auditors remuneration Auditors remuneration has been forecasted as an average of last 5

years’ actual expenses as a % of total revenues

Professional charges Professional charges increased by a CAGR over a period from FY

2011 to FY 2015

Table 56: Administrative and general expenses under Single Till


Admin Expenses 12.7 13.8 15.1 16.7 18.9

Table 57: Administrative and general expenses for Aeronautical services under Shared Till


Admin Expenses 12.3 13.3 14.6 16.1 18.2

Summary of Operations and Maintenance expenses

Table 58: Summary of total O&M expenses under Single Till


Payment to employees 62.6 94.0 103.3 113.7 125.0

Operational Expenses 81.9 112.2 126.4 142.3 157.8

Admin Expenses 12.7 13.8 15.1 16.7 18.9

Total 157.2 219.9 244.9 272.7 301.8



34

Table 59: Summary of total O&M expenses for Aeronautical services – Shared Till


Payment to employees 60.2 90.3 99.4 109.3 120.2

Operational Expenses 78.3 107.3 120.3 135.3 149.9

Admin Expenses 12.3 13.3 14.6 16.1 18.2

Total 150.8 210.9 234.3 260.7 288.3

9. Depreciation

CIAL has a policy of charging depreciation till 95% of the original cost and the same methodology

is considered while forecasting depreciation for the second control period. CIAL has revised its

depreciation calculation methodology based on The Companies Act 2013. The new Companies

Act proposes to calculate depreciation taking into account the useful life years of the assets. The

same methodology has been adopted to calculate depreciation of assets to be capitalized in the

second control period. For new assets, the depreciation for the year in which the assets will be

capitalized, is calculated on 50% of the asset value.

Table 60: Useful life for certain assets

Useful life years

Buildings 60

Parking bays 15

Roads other than RCC 5

Roads RCC 10

Railway over bridge 30

Runway re-carpeting 15

Rapid Exit and vertical link 15

In-line X ray baggage

inspection system 10

Software 5

Servers and Networks 6

Computers 3

E-Gate 6

Data center 6

CCTV 10

CUPPS, BRS, CUSS 6

Arrival conveyor 10

Furniture 5

Housekeeping equipment 15

Road sweeping machine 15

Trolleys 5

Four wheeler vehicle 8

Two wheeler vehicle 10



35

Useful life years

MEP works – Electrical

installation 10

Aerobridge 15

Light fitting 10

Office equipment 5

Accordingly, depreciation for assets is projected to be as under. Under single till, depreciation of

all the assets have been considered whereas under shared till, only depreciation of aeronautical

assets has been considered:

Table 61: Depreciation under Single Till

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Land 0.0 0.0 0.0 0.0 0.0








Vehicles 0.7 0.8 0.8 0.9 0.9


Financing Allowance 4.7 4.8 5.2 5.7 6.4

Total Depreciation 78.1 128.1 141.9 156.7 172.1

Table 62: Depreciation under Shared Till

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Land 0.0 0.0 0.0 0.0 0.0








Vehicles 0.6 0.8 0.8 0.8 0.9


Financing Allowance 3.9 4.0 4.4 4.8 5.4

Total Depreciation 69.1 114.4 126.9 140.5 155.0



36

10. Tax on income

The corporate tax for CIAL is the composite tax for all the services provided by CIAL. The

corporate tax rate considered is 34.60%. The tax for Aeronautical services has been computed by

taking into account aeronautical revenues, aeronautical expenses, depreciation on aeronautical

assets and interest expenses towards aeronautical capital expenditure.

CIAL was under tax holiday for its infrastructure investment till FY 2013-14, so tax was paid as

per MAT rates and has accumulated MAT credit which is to be set off against future corporate tax.

From FY 2015 onwards, CIAL has started paying tax as per corporate tax rates after setting off

required MAT credit. MAT rate considered is 21.34%. From FY 2016 onwards, the tax is

computed based on corporate tax rate adjusted for available MAT credit.

Accordingly, the tax second control period has been calculated as follows-

Table 63: Tax on income under Single Till


Income Tax 54.6 44.5 79.9 110.6 127.9

Table 64: Tax on income under Shared Till


Income Tax 61.6 38.7 50.2 62.6 77.7

11. Non-aeronautical revenues

Projections for non-aeronautical revenues have been made for specific components considering

agreements made with various vendors, expected growth in traffic, increase in terminal area and

WPI inflation. Following are various components of non-aeronautical revenue.

Duty free revenues

Non-aeronautical royalties, license fees and lease rentals

Utility service charges

Interest income

Other income

Revenue from Golf Course and other commercial activities

Table 65: Non aeronautical revenue forecast basis

Non-aeronautical

revenues

Forecast basis

Non-aeronautical royalties,

license fees and lease

rentals

Fuel throughput lease rentals has been forecasted based on leased

area as per CIAL’s agreement with BPCL and lease rentals per

square meter to be increased by 12.5% per annum every year. The



37

Non-aeronautical

revenues

Forecast basis

details of lease rentals from BPCL is given in the agreement attached

in Annexure 4.

Royalty engineering, royalty security and Royalty terminal handling

have been increased by 10% as per the existing agreements

To forecast the license fee for car park, FY16 number has been

derived from contractual agreement for the year and after that, it is

increased by 10%. The copy of agreement is provided in Annexure

5.

License fee for catering services has been forecasted based on

increase in passenger traffic. The copies of relevant agreements have

been provided in Annexure 6 and Annexure 7.

Meet & Greet revenue share to be increased by 10%

Revenue share from retail and F&B is to be increased by 10%

Minimum guarantee amount from retail and F&B is increased by

accounting the increased area. For FY 2017, increase in rental area

is considered for half year only. From FY 2022 onwards, minimum

guarantee amount increased by 5% along with increased in area.

Fixed rent for airline offices & rental space, retail area and F&B area

increased by 10% after accounting for increase in rental areas. For

FY 2017, increase in rental area is considered for half year only.

Duty free revenues Duty free revenues have been forecasted taking into account the new

business model and historical growth rate in duty free sales per

passenger.

Utility service charges Utility service charges to be collected from various service providers is

forecasted as an average of actual charges of last 5 years as a % of utility

expenses.

Interest income Interest income has been forecasted based on deposit rates and the last

year’s closing bank balance.

Other income Other income includes rent & services from other activities,

miscellaneous income and public admission fees. Other incomes have

been increased by 10% year-on-year.

Non-aeronautical royalties, license fees and lease rentals

Non-aeronautical royalties, license fees and lease rentals include following major revenue heads –

Royalty – Engineering

Royalty – Security

Royalty-Terminal Handling & Valet Service

License fee for Car park

License fee for catering services

Meet & greet revenue share

Revenue share from retail and F&B outlets

Fixed rent from airlines offices, retail outlets and F&B outlets



38

Minimum annual guarantee from retail and F&B outlets

Lease rentals from BPCL for land leased

Lease rentals from CIAL Infrastructures Ltd

The non-aeronautical royalties, license fees and lease rentals for the second control period is as

follow –

Table 66: Non-aeronautical royalties, licensee fees and lease rentals

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Royalty-Engineering 0.8 0.9 0.9 1.0 1.1

Royalty-Security 3.3 3.7 4.0 4.4 4.9

Royalty-Terminal Handling 3.4 3.8 4.1 4.6 5.0

License Fee Car park 8.7 9.5 10.5 11.5 12.7

License Fee Catering Services 2.7 2.9 3.3 3.6 4.0

Meet & Greet revenue share 0.1 0.1 0.1 0.1 0.1

Revenue Sharing Rent 5.1 5.6 6.2 6.8 7.5

Fixed Rent 19.8 27.2 34.4 42.5 47.6

Minimum Annual Guarantee 26.3 42.3 52.9 63.7 64.9

Lease rentals from BPCL 2.3 2.4 2.7 3.0 3.4

Lease rentals from CIAL Infra 0.1 0.1 0.1 0.1 0.1

Total 72.6 98.4 119.2 141.4 151.3

Duty free revenue

CIAL is partnering with a specialized agency for operations of duty free business to put in place

international best practices for the new international terminal. CIAL is desirous of increasing the

volume of the duty free operations significantly and bringing greater operational expertise and

efficiencies into the duty free business. Accordingly, it plans to hive off these operations to a

subsidiary for having greater focus. CIAL proposes to set up a 100% subsidiary company to carry

out the duty free operations.

Under the proposed structure, CIAL’s duty free revenues for the second control period have been

forecasted as follows –

Table 67: Duty free revenues

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Duty free revenues 58.5 66.6 80.0 96.2 115.6



39

Utility service charges

Utility service charges to be collected from various service providers is forecasted as an average

of actual utility service charges of last 5 years as a % of utility expenses. Utility service charges

for the second control period are as follow –

Table 68: Utility service charges

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Utility service charges 6.9 10.2 11.3 12.4 13.6

Interest Income

Interest income has been forecasted based on prevailing deposit rates and the last year’s closing

bank balance. Due to ongoing capital expenditure, CIAL would not be able to invest in long term

fixed deposits. Additionally, as CIAL is using internal cash accruals for capital expenditure during

the second control period, only a minimum cash balance of INR 20 cr has been maintained.

Interest rate forecast for the second control period is as follows –

Table 69: Interest income under Single Till

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Interest income 1.0 1.0 1.0 1.0 1.0

Table 70: Interest income under Shared Till

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Interest income 1.0 1.0 1.3 1.0 1.0

Other Income

Other income includes income from rent & services – other activities, miscellaneous income and

public admission fees. Other income has been forecasted to increase by 10% per annum. Other

income for the second control period is as follow –

Table 71: Other income

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Other income 8.2 9.0 9.9 10.9 12.0

Revenues from Golf course and other commercial activities

While determining aggregate Aeronautical Revenue Requirement (ARR), revenues from golf

course and commercial activities are considered as non-aeronautical revenues. Revenue from golf

course is linked to memberships and membership is assumed to remain constant. The revenue from



40

trade fair centre is increased by 10% based on historical trends. During the second control period,

another commercial complex will be capitalized and the revenue from the commercial center is

forecasted based on rental per sq.m. basis. The rental for commercial complex is forecasted to

increase by 5% per annum.

Table 72: Revenue forecast for golf course and other commercial activities

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Income from Golf Course 2.1 2.1 2.1 2.1 2.1

Income From Trade Fair

Centre 2.3 2.5 2.8 3.1 3.4

Income From Commercial

Complex 0.0 0.0 1.2 2.5 4.0

Table 73: Total Non-aeronautical revenue forecast under Single Till

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Non aero Royalty & License Fees 72.6 98.4 119.2 141.4 151.3

Duty Free Revenues 58.5 66.6 80.0 96.2 115.6

Interest Income 1.0 1.0 1.0 1.0 1.0

Utility services charges 6.9 10.2 11.3 12.4 13.6

Other income 8.2 9.0 9.9 10.9 12.0

Golf Course, Trade centre,

Commercial Complex

4.5 4.7 6.1 7.7 9.5

Total 151.7 189.8 227.5 269.5 303.0

Table 74: Total Non-aeronautical revenue forecast under Shared Till

FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

Non aero Royalty & License Fees 72.6 98.4 119.2 141.4 151.3

Duty Free Revenues 58.5 66.6 80.0 96.2 115.6

Interest Income 1.0 1.0 1.3 1.0 1.0

Utility services charges 6.9 10.2 11.3 12.4 13.6

Other income 8.2 9.0 9.9 10.9 12.0

Golf Course, Trade center,

Commercial Complex

4.5 4.7 6.1 7.7 9.5

Total 151.7 189.8 227.8 269.5 303.0

12. Additional Issues

Contingent liabilities

At the end of FY 2015, CIAL has contingent liabilities of INR 236 crore. INR 183.9 crore is on

account of income tax and service tax payments due to tax disputes currently being heard by

Hon’ble Income Tax Tribunal and Hon’ble High Court of Kerala. CIAL submits that although it



41

has not made any provision for the above INR 236 crore in the ARR computation, the same may

be allowed as part of revenue requirement for this control period by AERA if and when CIAL is

required to make such payments.

Cargo tariff filing

As advised by the Authority during the MYTP filing for the first control period, cargo operations

have been included as part of the airport operations for the MYTP submission for the second

control period as well.

Fuel throughput royalty

The royalty paid to CIAL by BPCL was INR 5 per kL till FY2008 and was increased to INR 35

per kL for FY 2009. From 1st April 2009, CIAL had increased the royalty fee to INR 70 per kL

with 20% annual escalation till 31st March 2015, in accordance with the Agreement. Since, the

first five years AERA control period is from April 2011 to March 2016, royalty fee was further

escalated at 20% for one more year, i.e till March 2016, as AERA has considered this tariff as part

of overall CIAL multi-year tariff proposal for control period ending on March 2016.

From April 2016, for the next five years of AERA control period for CIAL, revised Royalty fee

will be at INR 758.71 per kL for first year with annual escalation of 5%. Thereafter, at the end of

every 5 year control period, royalty fee value will be revised by CIAL and BPCL, in line with

market conditions.

The contract with BPCL is enclosed in Annexure 4.

Ground handling royalty

Presently, at Cochin International Airport, two ground handling agencies namely AIATSL, a

subsidiary of Air India and BWFS provide third party ground handling services. As per the

decision of the Board of the Directors, it was decided to appoint a third ground handling agency

for third party ground handling services at CIAL.

CIAL is contemplating a new operating model for providing ground handling services wherein the

equipment for ground handling services will be owned and maintained by CIAL. This initiative is

being explored in order to minimize the overall cost of ground handling operations, improve the

quality of service and ensure uniformity in service standards.

13. Aggregate Revenue Requirement

Based on the above mentioned regulatory building blocks, the ARR for the second control period

has been computed and is summarized below –

Table 75: Aggregate Revenue Requirement under Single Till


Average RAB 1142.1 1867.9 1974.3 2165.8 2493.8

FRoR 13.9% 13.9% 13.9% 13.9% 13.9%

Return on Regulatory Base 158.6 259.3 274.1 300.7 346.2



42


Depreciation 78.1 128.1 141.9 156.7 172.1

Operation & Maintenance cost 157.2 219.9 244.9 272.7 301.8

Tax 54.6 44.5 79.9 110.6 127.9

Subtotal 448.5 651.8 740.9 840.6 948.0

Less: 100% of Revenue from Non

Aeronautical Revenue 151.7 189.8 227.5 269.5 303.0

Target Revenue (ARR) 296.8 462.0 513.4 571.1 645.1

Table 76: Aggregate Revenue Requirement under Shared Till


Average RAB 942.7 1533.7 1616.6 1785.9 2062.6

FRoR 14.3% 14.3% 14.3% 14.3% 14.3%

Return on Regulatory Base 134.4 218.6 230.4 254.6 294.0

Depreciation 69.1 114.4 126.9 140.5 155.0

Operation & Maintenance cost 150.8 210.9 234.3 260.7 288.3

Tax 61.6 38.7 50.2 62.6 77.7

Subtotal 415.8 582.7 641.8 718.3 815.1

Less: 30% of Revenue from Non

Aeronautical Revenue 45.5 56.9 68.3 80.9 90.9

Target Revenue (ARR) 370.3 525.7 573.5 637.5 724.2

14. Yield Calculation and escalation factor

The yield per passenger is calculated based on the present value of ARR and total traffic as per

AERA guidelines.

Table 77: ARR and estimated yield per pax for Single Till


ARR 296.8 462.0 513.4 571.1 645.1

Passengers (million) 8.4 9.0 10.0 11.2 12.4

Yield per passenger* 446.6 462.6 479.3 496.6 514.4 * Calculated as per AERA guidelines

Table 78: ARR and estimated yield per pax for Shared Till


ARR 370.3 525.7 573.5 637.5 724.2

Passengers (million) 8.4 9.0 10.0 11.2 12.4

Yield per passenger* 510.5 528.9 547.9 567.6 588.1 * Calculated as per AERA guidelines



43

15. Conclusion

Clause 13.1(a), Chapter III of the AERA Act, 2008, states that it can propose different tariff

structures for different airports having regard to all or any of the following considerations:

“…

i. the capital expenditure incurred and timely investment in improvement of air facilities

ii. the service provided, its quality and other relevant factors

iii. the cost for improving efficiency

iv. economic and viable operation of major airports

v. revenue received from services other than the aeronautical services

vi. the concession offered by the Central Government in any agreement or memorandum of

understanding or otherwise

vii. any other factor which may be relevant for the purposes of this Act

Provided that different tariff structures may be determined for different airports having regard to

all or any of the above considerations specified at sub-clauses (i) to (vii);…)”

In this MYTP proposal, the Authority is requested to consider Shared Till regulatory approach for

the Cochin International Airport for the long term benefit of all the stakeholders. Application of

single till regulatory mechanism strictly as per the Guidelines would, inter alia:

a. adversely impact CIAL’s ability to arrange funds for future expansion

b. adversely dis-incentivize the development of non-aeronautical revenue streams which have

been effectively used by CIAL to subsidize the aeronautical tariffs

c. undermine CIAL’s pioneering effort in managing a cost-effective functionally efficient

airport.

It is to be noted that even with the increase in tariffs, charges at Cochin International Airport would

be among the lowest with respect to comparable airports in the country. Cochin International

Airport has always strived to keep air travel affordable for its passengers while maintain high

service quality standards.

We are confident that AERA would issue a favourable tariff order to CIAL based on the

aforesaid considerations.

16. Annexures



44

Annexure 1 – Agreement between CIAL and the Federal Bank Ltd

for the term loan



45

Annexure 2 – Agreement between CIAL and SITA



46

Annexure 3 – Land utilization details

Particulars Area (acres)

Approach road 89.7

DVOR -installation + influence area 72.3

Golf -excluding DVOR influence area 59.7

Solar area 52.0

International cargo, CPC, EDI center, Truck parking 6.4

Domestic Cargo 0.7

Domestic Terminal 4.5

International Terminal (Existing) 8.0

International Terminal (New) 80.4

Car Park International 7.5

Car Park Domestic 6.9

BPCL Building 1.2

Airline Office Building 1.0

Cargo Handling Agents Building 1.0

A T C 1.7

Utility Building 2.4

DVOR 11,Thattekkad 5.0

Outer Marker ,Koovapadi 1.0

Middle Marker,Kaladi 0.2

NDB,Cheranalloor 0.9

Sewage Treatment Plant 0.7

Operational Area 662.1

Trade Centre 5.0

LUP zone 1 -hotel, entertainment 30.1

Office-cum-Commercial Complex 2.0

LUP zone2 -operational funnel area 36.0

FEC area (Future expansion) 25.0

Retail Mall, Shops 3.0

110 KV Substation 1.5

Building adjacent to NIT 2.5

CIASL 33.3

BPCL Aviation Tank 5.6

IOC Land 1.1

IOC RO 1.4

11 KV SS, Power House, Water Tank 0.7

Public Canteen 0.1

Federal Bank Building 0.2

Future Expansion 22.0

Rehabilitation Land (balance) - Nayathode area 23.0

Common Rehabilitation facilities 13.4

Rehabilitation Land (balance) - Akaparambu area 5.4

Total Land 1276.0



47

Annexure 4 – Agreement between CIAL and BPCL for fuel

throughput services



48

Annexure 5 – Agreement between CIAL and Bency & Company for

car park management



49

Annexure 6 – Agreement between CIAL and Lulu Flight Kitchen

Pvt Ltd



50

Annexure 7 – Agreement between CIAL and Anjali Hotels (p) Ltd

for flight catering



51

Annexure 8 – Agreement with TDI for the license of the

advertisement right



52

Annexure 9 – Agreement between CIAL and Vodafone Essar

Cellular Ltd for operation of mobile phone counters and wall

mounted mobile charger boxes



53

Annexure 10 – Agreement between CIAL and D C Books for the

book shop

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