Mid Term Assignment of

Fiscal Aspects of Aviation Management

Topic:

Application of BOT (Build, Operate and Transfer) Model in Airport Infrastructure

Course:

BS Aviation Management
Semester 7th

Course instructor:

Sir Nadeem Ansari

Submitted by:

Muhammad Arslan Aslam

BAM -9234

BOT (Build, Operate and Transfer)

BOT Build, Operate and Transfer) is a type of project finance method or privatization in which a private or public private (partnership) company builds or redevelops the whole airport, or of any specific facility e.g. terminal, runway, taxiway, and some portion of apron or of making a new parking place for major or huge and heavy aircrafts. The company operates it to specific period of time like 20-30 years and after that the property is transferred to the owner or Government or contracted organization. All finance is invested by BOT contract holder or company and it operates the facility until it earns amount equal to invested money more than that money is generated as dependent on terms and conditions mentioned in the contract/ concession documents. This enables the project proponent to recover its investment, operating and maintenance expenses in the project. In Pakistan, At Karachi and Lahore airports there is no demand of major expansion at both airports.

Peshawar International Airport

Bacha Khan International Airport (OPPS; previously called) Peshawar International Airport, is an airport located in the city of Peshawar in the Khyber Pakhtunkhwa province of Pakistan. It is located about a 10-minute drive from the centre of Peshawar; it is the fourth busiest airport in Pakistan. One unusual feature is that one end of the main runway

is crossed by a railway line -- the seldom-used Khyber train safari to Landi Kotal in the Khyber Pass. The airport was renamed on 27 January 2012 after Khan Abdul Ghaffar
Khan (also known as Bacha Khan), a Pashtun nationalist political leader. Peshawar is a major passenger hub with 75% flights internationally bound. The airport is

currently under evaluation to be upgraded to make it compatible with future needs of the geographical location. The CAA is currently working with the provincial government to develop the airport to meet international standards. The airport has several facilities to
handle the normal needs of passengers such as telephone calling (domestic/international) booths, money exchange facilities, automatic teller machines, Internet stations information counters, gifts and souvenir shops, snack shops, rent a car services, as well as a post office. At present the following technical features are available at the airport.

Runway;
Peshawar Intl. Airport (OPPS) has only one runway 31 and 13 and elevation 3289 feet. It has 9,000 feet (2,700 m) long, 150 feet (46 m) wide with 10-foot-wide (3.0 m) shoulders on either side corresponding to International Civil Aviation Organization Category 4E.

Aprons;

For passenger and cargo. Combination of flexible and rigid pavements. Nose-in parking for 4 wide-bodied aircraft at a time or 3 Airbus and 2 narrow body aircraft at a time.

Now there is a need of another runway at Peshawar International Airport who will not have rail track on it. Major airports in Pakistan e.g. Jinnah International Airport and Allama Iqbal International Airport have two runways but Peshawar International Airport has only one runway. When another runway is constructed, load is divided and it will also be beneficial for flights when train on its track pass on runway. As aviation industry is growing and traffic demand is increasing, it is necessary to develop airport to meet international standards by improving facilities, construction of a new runway and expansion of more parking space for major aircrafts.

Now Peshawar Intl. Airport (OPPS) has following four division of development;
1. Construction of a new RWY and make it ready for operation; A new runway will be 10,000 feet long and 150 feet wide. As traffic demand is increasing, there is a need of a new runway to meet the standards of future.

2. Expansion of apron for more parking spaces for aircrafts 3. Maintenance and development of terminal building or other major facilities at OPPS 4. Improving lighting system of airfield; At Peshawar Intl. Airport RWY 13, 31 has
not RWY edge lights but has RWY centre line lights so there is demand for RWY edge lights for performing night operation efficiently.

I am managing director of my company, HEAVY LIFTING Inc. that has taken a tender from Government of Pakistan (Civil Aviation Authority) on BOT method or arrangement.

HEAVY LIFTING Inc.

HEAVY LIFTING Inc. is a well reputed construction company having much expertise in construction projects of Aviation infrastructure. It has qualified engineers and other staff with great experience to work for Aviation facilitation. It has been working for many years for projects related to aviation infrastructure.

BOT model works in three phases:

Build:

All work related to designing of RWY, expansion of apron would be done with the help of National Engineering Services (Pvt.) Ltd. All other construction work would be done by HEAVY LIFTING Inc company staff. 25% of money invested in project is lent as a commercial debt (loan) from bank. 25% money is generated through special facility revenue bonds. The company has 50% reserve of its own money to finance the project. Three to five well trained and highly experienced engineers would be hired. RWY, Installation of lighting system and expansion of apron for parking for aircrafts would be of cost 3-3.5 billion PKR OR approximately $3 million or $3000000. Maintenance, development of terminal and expansion its specific portion will cost 1 billion PKR or $1 million or $1000000. The company will complete the project within 2-2.5 years. Upfront costs or initial investment are submitted for approval from the company, when approved construction will begin.

Operate:

HEAVY LIFTING Inc. is a construction company having much expertise to handle many projects of aviation infrastructure development in different regions of the world. Our company is an ISO9001 certified company which will perform all processes and systems according to quality by Research and Development Department. All above mentioned facilities are constructed then it will be operated by HEAVY LIFTING Inc. and some staff will be required for day to day operation. The company would bear day to day expanses and earn much profits according to agreement of 10 years During operation, maintenance of facilities would be done by the company. The company will operate some portion of terminal, parking and RWY for 10 years.

Transfer:

All assets or facilities in appropriate condition will be transferred to CAAP after 10 years of operation. All assets will be owned by CAAP.

Terms and Conditions

After negotiating between HEAVY LIFTING Inc and Civil Aviation Authority of Pakistan (CAAP), following conditions would be defined and agreed between two parties 1. All finances/financial risks would be bared by HEAVY LIFTING Inc as per requirement of BOT method.

2. Designing would be done with the help of National Engineering Services (Pvt.) Ltd. and all other tasks would be done by company itself. 3. All finances would be generated by the company for project and no subsidy would be given to company. 4. Company would be responsible for the completion of project in time; any delay would not disturb the length of period of operating the facility according to agreement. 5. Government of Pakistan or CAAP would not keep ensure the company for any political change in the country. 6. If any major political change occurs, CAAP would pay return on investment (ROI), when political change at major level affect or disturb project as per agreement. If CAAP is not ready to pay, then company has right to claim through Supreme Court. 7. The HEAVY LIFTING Inc would have entitlement to operate most of airside area of Peshawar Intl. Airport up to 10 years. 8. The company will earn money during operation and transfer the new constructed RWY, some portion of terminal and parking areas to CAAP or Government after 10 years. 9. No investment would be given by CAAP to run day to day operations to company.