From white elephant to real elephants – what’s the story behind India’s reported interest in Sri Lanka’s newest airport?

It was reported last week that following lengthy negotiations, Airports Authority of India (AAI) was to sign an agreement with the Sri Lankan’s Government jointly to operate Mattala Rajapaksa International Airport under the terms of a 40-year concession contract. The AAI was expected to hold a 70% stake in the joint venture formed to operate the airport. However, just as quickly as the news spread India’s Minister of State for Civil Aviation, Jayant Sinha, denied the story.


Summary:

  • There has been increasing rumours that the Indian government – either directly or through Airports Authority of India (AAI) – could acquire majority control  and operation of Mattala Rajapaksa International Airport in Sri Lanka;
  • India’s Minister of State for Civil Aviation, Jayant Sinha, has denied AAI is considering any such proposal;
  • India’s interest may have political drivers and could be based around China’s growing influence in the sub-continent;
  • Mattala Rajapaksa opened with several carriers committed to service there, but currently has only limited scheduled domestic operations.

In a statement to the Lok Sabha (Parliament), Mr Sinha said AAI was not considering a proposal to form a JV with the Sri Lankan Government to operate the Mattala airport and that AAI had no plans to develop aviation training or maintenance, repair and overhaul facilities at Mattala.

The current situation remains far from clear. In mid Jul-2018 Sri Lanka’s Government requested AAI submit a business plan for the operation of the airport. AAI is expected to tackle issues including how many flights it would bring in, and which Indian airlines in particular would service the airport even though it has no control over those.

Intriguingly, it once appeared, when this procedure began, that the Sri Lankan government was seeking to do a deal with the Indian government directly rather than with AAI, which is an agency operating under the auspices of the Ministry of Aviation. Later (and only recently) the Sri Lankan airport was planning to form a joint venture with a private Indian company to operate the airport. GMR has become the chief “suspect”, and in fact had been since as long ago as Oct-2017 when the Sri Lankan government was first reported to be “in advanced talks” with an Indian company to award a concession contract.

And the situation is further confused by a statement made at the beginning of Jul-2018 by Sri Lanka’s Deputy Minister of Transport, following the visit of a delegation from India to the extent that the government does not plan to sell the airport “despite (it) making losses”.

So… a deal with the Indian government, with AAI as a JV partner, with a private Indian company and no deal at all. All eventualities are currently on the table if reports are to be believed.

India’s interest may have political drivers and could be based around China’s growing influence having supported the initial financing of the airport and already holding a presence at the nearby Hambantota shipping port (to access one of the world’s busiest shipping lanes) under a 99-year lease. Obviously China’s intentions are unclear, but under its ‘One Belt, One Road’ initiative access to a port and airport would have given it increasing power in the sub-continent.

An Indian company was favoured by the Sri Lankan government to be the majority partner because India “can bring the largest volume of tourists to this airport”. And Mattala Rajapaksa Airport needs those visitors. It was conceived as a second international airport for the country, but is situated on the south coast, 120 km from Colombo. It was built by the government with the benefit of soft loans including from China Exim Bank, opening in 2013 as the country’s first green field airport.

One of the reasons for site selection appears to be that of reconstruction of a town (Hambantota) and wider region that was destroyed in the 2004 Indian Ocean tsunami. The intention is transform Hambantota into the second major urban hub of Sri Lanka, and purposefully at a distance from Colombo so as not to over-centralise. While there are beach resorts and safari sites in the area, the Hambantota district is not Sri Lanka’s premier tourist location by any means. The main reason for the development is reconstruction.

MAP – Mattala Rajapaksa International is the first greenfield airport and the second international airport in Sri Lanka, after Bandaranaike International in ColomboSource: Google Maps

Mattala Rajapaksa opened with several carriers committed to service there, led by SriLankan Airlines, which actually set up a hub operation, even though the airport is not well located geographically to support hub services. Demand was so low they soon left and currently there are no scheduled services as such, apart from air taxi services operated by Cinnamon Air using Cessna aircraft.

According to CAPA – Centre for Aviation, data from OAG shows all the seat capacity is concentrated into a single hour block (17:00 – 1800) daily with flights to two places – Katugastota (Kandy) in the centre of the country and Anuradhapara, in the north, probably for tourist reasons. No traffic data has been made available beyond 2015 when there were less than 6,500 passengers in the entire year.

Its usage is being diverted towards MRO and cargo activities, possibly aircraft storage. The access road to the airport is now used for farming purposes and at night by elephants. From white elephant to real elephant one might say.