RETURN OF QUEUES
On the face of it, the Delhi airport chaos smacks of a capacity constraint and consequent return of dreaded consumer queues from the 1990s. EPISODE #104
Dear Reader,
A very Happy Monday to you.
Last week, outrage on Twitter against congestion at Delhi airport peaked. The decibel level was such that the Aviation Minister had to engage in some fire fighting and conduct a visibly choreographed chat outside the airport with a friendly television channel. However, next day the chaos was back and so were tempers.
Most of them, overnight experts on aviation, were ranting about the long queues—while entering the airport, later at immigration and subsequently for security clearance—that passengers negotiated before reaching their designated aircraft. In fact several claim to have missed their flights.
I believe we are missing the woods for the trees here.
Yes, the angst is legit. But the big takeaway is not about the competence of the security personnel. Instead it is that capacity at Delhi airport has probably peaked. No amount of tinkering at the edges is going to solve the problem.
And expanding capacity means investments, which, as most industrialists will tell you, is still a very risky idea—especially in costly infrastructure projects. So this week I put the spotlight on this problem and argue that ease of doing business should be for real. Do read and share your feedback. The cover picture is sourced from Twitter and is taken Nikhil Inamdar. Thank you Nikhil.
A big shoutout to Niranjan, Balasurya, Aashish, Lakshmisha, Kartik, Gautam, Premasundaran, Vandana, Ranjini and Prasanth for your informed responses, kind appreciation, critique and amplification of last week’s column.
Gratitude also to all those who responded on Twitter and Linkedin. Reader participation and amplification is key to growing this newsletter community. And, many thanks to readers who hit the like button😊.
DIAL TROUBLE
The last few weeks have witnessed unprecedented congestion at the swanky, privately owned Delhi International Airport (DIAL). Visibly irate passengers have vented about the airport personnel, social media and so on, forcing the civil aviation minister to publicly step in and attempt damage control.
In a visibly choreographed encounter with a television channel the minister claimed the matter would be resolved with the deployment of additional personnel. But to no avail. Next day the chaos was back and passengers were even more irate.
Twitter was one platform, which both informed and entertained—sharing a few samples below:
Now that we are done with the sardonic humour, let us try and nail down the nub of the problem.
Congestion Mystery
Prima facie, the chaos is a symptom of a capacity constraint.
So tinkering at the margin, as the minister was proposing, will do little to resolve the problem. Instead, the promoters, GMR group, will have to invest in capacity creation; interestingly, one voice missing in all this action is that of the private operator.
DIAL is a joint venture, between GMR Group (54%), Airports Authority of India (26%), Fraport AG and Eraman Malaysia (each of whom own 10% equity).
The DIAL website lists the following specs for Terminal-3, which hosts international and domestic flights. (The bold emphasis is mine.)
Terminal 3 : Key Specs
34 million passengers: per annum capacity
5.4 million square feet: area
9 level passenger terminal building and 2 piers each 1.2 km long
In-line baggage handling system with capacity to handle 12,800 bags per hour
6 common check-in islands—168 check-in counters
95 immigration counters (49 Outbound and 46 Inbound)
78 passenger boarding bridges (including 3 passenger boarding bridges for A380 or similar sized aircraft)
14 baggage reclaim belts including 2 belts for Out of Gauge (OOG) bags
I am no aviation expert, but the data shared by DIAL on their website on per annum capacity, suggests that the airport infrastructure is stretched.
Check out the data on aircraft landings at Delhi airport shared below. There has been a big surge—but then it should be borne in mind that the covid-19 pandemic had impacted operations in 2021.
According to the Airports Authority of India (AAI), international landings were up by 73.2% and that of domestic landings by 48.9% in the seven-month period ended October this year.
Now check out the data on passenger traffic for the same period—the surge is staggering.
International arrivals has more than trebled in the seven-month period ended October as compared to the same period last year. Domestic passenger traffic too spiked, almost doubling in this period.
Frankly, for any business this kind of surge in traffic is good news. However, if capacity is a challenge the opportunity can soon turn into a liability.
If you go back to the key specs on Terminal-3, you would find that the annual capacity of the T-3 is 34 million passengers.
What is baffling though is that DIAL, pre-covid, was handling traffic of the same magnitude—in fact, much more. And we never heard or experienced the glitches that were witnessed last week.
For the same period, April-October, air passenger traffic, domestic and international together, adds upto 39 million passengers. Similarly for aircraft landings, domestic and international together, was 261,889.
In the absence of any official explanation, it can only be surmised that DIAL may have shrunk staff and capacities in the covid phase and then delayed (deliberately or otherwise) in restoring the cuts.
Alternatively, it may well be a process tweak, which in turn may have triggered a domino effect on operations.
Exactly why DIAL, and not the union government, needs to clarify matters. In an era of market forces it is rather ironic for the government to be out defending disruptions in what is essentially a private sector run project.
Queues Return
This tweet is so right. If demand exceeds supply, or even comes close to matching it, the outcome is an inevitable shortage.
And those of us who grew up in the 1980s and 1990s, would well recall the dreaded queues.
Whether it was drawing cash from the bank, getting admitted in a hospital, collecting monthly rations from the Fair Price Shop, paying electricity/water bills, booking rail tickets, there was one common thread: A queue. I recall reaching the railway counter at 5 am to discover that hundreds had beaten me to the draw.
While waiting it out was one challenge, another was dealing with the bureaucracy, who seemingly derived immense pleasure by making us go through more hoops—often it meant going to the back of the queue—if not drag out the transaction.
Middle class misery was alleviated with the rise in disintermediation. The emergence of ATMs reduced, if not eliminated, frustrating sessions at bank branches. Similarly payment of utility bills went online. So did bookings for air and rail trips.
Now that consumers have been used to years of life without frictions, their ire is very understandable. Especially, given the fact that one generation has never ever experienced queues.
If indeed the challenge this time is the lack of adequate capacity, then it won’t be the first.
You may recall a similar circumstance when the Gurugram toll (now dismantled) was opened to traffic in 2008. There were massive snarls and consumers were similarly outraged from the very first day of operations. At that time I was working at Mint and was working with some of the finest reporters. I recall suggesting to them to check on the road traffic projections versus actuals.
The hunch was correct. What they discovered was a massive capacity challenge on the first day itself.
Sharing a quote from the story below:
“Traffic on the expressway on the first day turned out to be what Rites, which helped create the detailed project report (DPR), had projected it would see in 2013.
While DPR, prepared in 1998, estimated traffic in the first year at 80,000 vehicles a day, the actual average daily traffic is now being estimated at 140,000 vehicles.”
Imagine the DPR was ready in 1998, but the project was completed nearly a decade later. This is the sad subtext of most infrastructure projects: For a host of reasons, including legal challenges, political campaigns and so on, delay is inevitable.
This is not to justify the actions of the private sector. But, given the high cost of capital, especially when compared to the terms prevailing in other countries, every entrepreneur prefers to be conservative—the cost of underwriting delays can burn a hole in a company’s balance sheet.
I have no idea what went down at DIAL. Frankly, I wouldn’t be surprised if the promoter indeed preferred to err on the side of caution. And as always, consumers ended up paying the price.
Recommended Viewing
Sharing the latest post of Capital Calculus on StratNews Global.
The guest this week was Ambassador Gautam Bambawale. I picked up from where I left off in my earlier newsletter arguing how this is ‘India’s Moment’: helming three global bodies—the UN Security Council, Shanghai Cooperation Organisation and the G20.
Ambassador Bambawale shared his thoughts on what this meant for India’s bid to be a permanent presence at the global high table. Especially, the give and take it involves. The big takeaway was his argument that India needs to ensure steady economic growth (6-8%) to ensure that it continues to be a weighty presence on the global stage. Do watch and share your thoughts.
Sharing the link below:
Till we meet again next week, stay safe.
Dear Anil,
We just came back from Pune on Sunday and the situation at T3 Delhi airport was not as bad as media reports, though there were huge crowds everywhere. December is typically the busiest month for Indian airports, and winter rush will increase further from next week onwards.
Airports in India are some of the busiest and fastest growing. Congestion and crowding are to be expected, if the infrastructure doesn't grow at the same pace . Delhi, Mumbai and Bangalore are the busiest and cater to around 42% of all travellers.
Construction of airports in smaller towns under the UDAN scheme has reduced some burden on top three airports.Digiyatra app can also help to save time. The government and airport authorities have definitely swung into action to ease the situation after the social media complaints.
Dear Anil,
Thanks for the informative piece, some thoughts:
1. Airports globally have been having this issue, largely due to inadequate & dissatisfied manpower. The question is are all stakeholders regularly communicating & coordinating, doubt the Ministry has a role in ground operations & currently seems to be a top down approach vs a ground up solutions.
https://www.reuters.com/business/aerospace-defense/europes-summer-travel-chaos-2022-06-19/.
2. Can tech solutions help, waiting for entrepreneurs who are solving world problems through tech to jump in :-) but airports are experimenting
https://www.airport-technology.com/features/contactless-security-how-technology-cut-airport-queues/
3. There is a huge opportunity for baggage transportation services- can someone do this at scale with service & ensure we travel only with essentials while the heavy suitcases come in later – a well-funded business that works with the airport & airline to actually incentivise you to travel light & makes money thorough economies of scale.
4. In the long term improved road infrastructure & hopefully some form of PPP in railways will give consumers more choice. The new Mumbai – Delhi expressway could be a gamechanger for consumers but also businesses.
5. Similar in the long run immersive technologies (AR/VR) theoretically could impact business travel, Mark Zuckerberg has bet his company on this!.
6. But, DIAL has to do a better job communicating with consumers, unfortunately there is little incentive for monopolies to do that.
Best,
Saurabh