November 29, 2022
Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors

Economic Impact of Third Terminal in Dhaka Airport

Economic Impact of Third Terminal in Dhaka Airport

The construction of the 3rd terminal of Hazrat Shahjalal International Airport in Dhaka is one of the ongoing megaprojects in Bangladesh. The airport’s third terminal, which has been under construction since 2019 at around 21,300 crore BDT, is expected to become operational by October 2023. Bangladesh’s main airport has been criticized for various reasons, including inadequate passenger service, baggage handling, and misbehavior. The airport has even emerged as the ninth worst airport in Asia regarding passenger service. However, the new terminal is expected to play a significant role in the country’s trade and commerce besides providing international standard facilities and amenities to local and international passengers. 

Overview

In 2014, the Civil Aviation Authority of Bangladesh (CAAB) conducted a feasibility study on the 3rd Terminal at Hazrat Shahjalal International Airport in Dhaka. According to that study, Hazrat Shahjalal International Airport can handle 8 million passengers annually, but the annual passenger traffic is expected to increase to 140 million by 2025 and reach 250 million by 2035. As a result, the existing airport is being expanded to accommodate additional passengers. Japanese donor JICA conducted a financial and economic evaluation of the project in 2016 in conjunction with CAAB’s feasibility test, the full report of which was subsequently released in March 2017. Before JICA’s analysis, the project’s target financial internal rate of return or FIRR was set at around 2 percent (1.98%). But according to the JICA report, the FIRR of the terminal is 6.2 percent which is higher than the target. The Financial Internal Rate of Return, or FIRR, is an indicator of an investment’s potential profitability.

On the other hand, although the target of the economic internal rate of return or EIRR is 12 percent, according to the JICA report, it was 22.5 percent. Moreover, FIRR, EIRR, and sensitivity analyses have shown that the proposed project is economically feasible, according to JICA. According to The Daily Star, after announcing the third terminal construction project of Hazrat Shahjalal International Airport, a total of 22 tenders were sold. Still, only two proposals were submitted against it. From there, the project contract was awarded to Aviation Dhaka Consortium (ADC) through negotiation. In 2017, the cost of the project was approved as Tk 13,610 crore in the ECNEC meeting, but in November 2019, the Cabinet Committee on Public Purchases approved a further 40 percent increase in the cost of the project to Tk 20,598 crore. According to Civil Aviation Secretary Muhibul Haque, initially, there was no mention of a separate cargo village in the terminal’s plan. Therefore, the implementation cost also increased due to the later additions. Besides, it also included plans to replace the entire airport’s fire fighting equipment with entirely new equipment as it became obsolete. Finally, the construction of the 3rd terminal at Hazrat Shahjalal International Airport started in 2019 with the joint funding of the Bangladesh Government and JICA at the cost of 21,300 crore BDT.

The construction Cost of the 3rd terminal at Hazrat Shahjalal International Airport

A three-story terminal building covering an area of ​​542,000 square meters is being constructed. The building has an area of ​​230,000 square meters per floor, serving 12 million passengers annually. For aircraft parking, apron parking is being constructed to accommodate 37 aircraft in an area of ​​230,000 square meters of this terminal. Besides, the terminal has 115 check-in counters, 64 departure and 64 arrival immigration desks, 27 hold baggage x-ray screener machines, 11 body scanners, 25 central departure security screenings, 12 boarding bridges, and 16 luggage belts. According to Civil Aviation and Tourism Minister Mahbub Ali, once operational, passengers will be able to enjoy the same quality of service at this terminal as London’s Heathrow or Thailand’s airports. Besides Aviation Dhaka Consortium (ADC), Mitsubishi Corporation, Fujita Corporation, and Samsung C & T are working on the project to build the 3rd Terminal at Hazrat Shahjalal International Airport. Besides, according to CAAB information, there are currently around 4,000 workers working on the project, both domestic and foreign. So far, 34 percent of the project has been completed, and it will be opened for public use by October 2023, according to the concerned authorities.

Economic Impact

Dhaka’s Shahjalal International Airport has an average of 240 flights per day. According to JICA’s forecast, the total aircraft movement of ground and military aviation in Bangladesh will exceed 1,65,430 by 2025 and 2 lakh 64 thousand by 2035. The third terminal of Shahjalal International Airport will play an essential role in handling this additional aircraft movement. However, according to the authorities concerned, once the third terminal is operational, the volume of aircraft movement will increase several times. And if the amount of aircraft movement grows, the number of passengers traveling by air through this main airport of Bangladesh will also increase.

Hazrat Shahjalal International Airport’s two international terminals currently have a total passenger handling capacity of 80 lakhs per annum. The airport already handles about 70 lakh passengers every year. According to JICA’s forecast, annual passenger demand will exceed 160 million by 2025 and 230 million by 2030. Another new airport is needed in Dhaka to serve this growing number of passengers, but it is impossible to implement it due to a lack of sufficient space. Besides, building a new airport would require a lot of time and money. As a result, instead of building a new airport, it was decided to expand the existing airport and build a new terminal. Once the third terminal of Hazrat Shahjalal International Airport is operational, the total passenger handling capacity of the airport will increase over two crores. In addition to increasing the number of passengers, the revenue per passenger will also increase. 

Besides passengers, the third terminal will play an essential role in cargo handling throughout the airport. Currently, most of Bangladesh’s foreign trade is made through sea and land ports, where nearly three-quarters of it is being done through the Chittagong seaport. The port has a total cargo handling capacity of 40 lakh TEU. On the other hand, Hazrat Shahjalal International Airport currently has only 2 lakh TEU of cargo handling capacity as there is no separate cargo village. On the other hand, according to domestic importers and exporters, Dhaka Airport’s import and export operations are currently prolonged due to a lack of modern equipment and adequate storage facilities. Also, domestic exporters export large quantities of fruits and vegetables by air to various world countries, including the Middle East and Europe. But, as the airport does not have freezers or air-conditioned warehouses, fruits and vegetables are left in the open for 8 to 10 hours before being loaded onto flights, resulting in quality loss. Currently, the airport doesn’t have adequate storage facilities, and other goods are also left in the open after unloading. Due to this, the country’s foreign trade is being damaged. An import and export cargo village is being constructed at the new terminal of Dhaka Airport.

The terminal’s 27,000-square-meter Import Cargo Village will be able to unload over 2,73,470 tonnes of cargo every year, while the 36,000-square-meter Export Cargo Complex will be able to offload about 5,47,47,941 tonnes of cargo every year. Besides, it will be possible to reduce the time of clearance of goods in import-export through modern equipment. Since the new terminal will have two separate cargo villages for export and import, imported and exported goods can be stored at the airport if necessary, and the air-conditioned warehouses prevent perishable goods from spoiling even if they are stored for a long time. According to a senior official of the Bangladesh Fruits Vegetable and Allied Products Exporters Association, once the new terminal is operational, the export process will become more manageable, and the cargo handling process will also be completed in less time due to the use of automation. According to BGMEA Vice President Shahidullah Azim, the third terminal at Hazrat Shahjalal International Airport will open new doors of possibilities for trade and commerce in Bangladesh. He also said, “Export, import, and domestic and foreign investment of the country are also growing with the economy of Bangladesh. In such a scenario, the new terminal with modern facilities will further boost trade and commerce in the country.” Besides, the new terminal will play a significant role in the country’s economy and increase the airport’s income if the amount of goods transported by air increases due to the construction of cargo villages and modern equipment.

Currently, passenger boarding or entry at Dhaka International Airport takes a lot of time. Despite arriving at least two to three hours before boarding, passengers have to stand in long queues. In addition, since there are only eight conveyor belts in the two terminals of the airport, it takes a lot of time for passengers arriving from abroad to get their baggage. In addition, incidents like lost, stolen or damaged baggage can often be heard from passengers. As a solution to these problems, Biman will outsource baggage handling duties starting from ground and cargo handling to a third party after the construction of the new terminal. Besides, the various modern services of the new terminal will be able to reduce the waiting time to a great extent besides reducing the multiple sufferings of the passengers arriving at the airport.

According to Maksudul Islam, director of the third terminal project, the new terminal is being built in such a way that passengers coming from different parts of the world will have an excellent and beautiful image of Bangladesh as soon as they land at the airport. The terminal will have all kinds of international quality amenities such as high-quality restaurants, shopping malls, super shops, luxury cafes or bars, etc., which will provide passengers with an experience similar to airports in developed countries like London Heathrow or Singapore. Besides, these facilities providers or vendors will become another revenue-generating source for airport authorities.

Existing terminals currently have only 1000 car parking facilities at the same time. As a result, passengers and their relatives who come to receive or see off still have to worry about parking. Besides, according to CAAB’s master plan report, by 2035, the demand for car parking may increase to about 2 thousand (1948). Keeping this growing demand in mind, parking spaces for parking 1230 vehicles are being constructed in the new terminal in an area of ​​54,000 square meters. As a result, the total car parking space will increase to 2,230. This will solve the car parking problem for those arriving at the airport. As a result, passengers will save time and suffer less. In addition, the terminal will be directly connected to the rail network through Metrorail via individual subway stations and the airport railway station as a means of transportation. In this way, after landing, the passengers will be able to go directly to their destination from inside the terminal without leaving the airport. Besides, passengers can quickly reach their destinations by using facilities like BRT or Bus Rapid Transit, Elevated Expressway right out of the airport. Apart from this, private enterprises have already built world-class facilities such as hotels, super shops, and shopping malls of different quality, categories and modern amenities around the airport, which will facilitate domestic and foreign passengers as well as connecting flight passengers. As a result, besides ordinary passengers, many tourists will come to Bangladesh using this airport every year, which will also boost the country’s tourism sector. Apart from this, once the terminal is operational, it will require a large amount of human resources to conduct daily operations from its maintenance, which will create new employment opportunities for the country’s people.