Document of The World Bank

FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No. 2039b-CO FILEC'O'"PY

STAFF APPRAISAL REPORT Public Disclosure Authorized DOMESTIC AVIATION DEVELOPMENTPROJECT

COLOMBIA

September 28, 1978 Public Disclosure Authorized

Projects Department Latin America and the Caribbean Regional Office Public Disclosure Authorized

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Currency Equivalents

1 Colombian Peso (Col$) = US$0.03 US$1.00 = 37.6 Calombjan Pesos (Col$) 1 million Colombian Pesos = US$26,600

System of Weights and Measures

Metric

1 kilometer. (km) = 0.62 mile (mi) 1 meter (m) = 3.28 feet (ft) 1 kilogram (kg) = 2.20 pounds (lb) 1 metric ton = 2205 pounds 1 metric ton-kilometer = 0.69 short ton-mile 1 passenger-kilometer = 0.62 passenger-mile

Fiscal Year

January 1 to December 31

Abbreviations and Acronyms

Aerocondor Aerovlas Condor de S.A. Taxi Aero el Llanero S.A. Aerovlas Nacionales de Colombia S.A. CFR Crash, Fire and Rescue Buildings and/or Equipment CIF Including Costs, Insurance and Freight CNR Colombian National Railways CNT Corporaci6n Nacional de Turismo CONPES Economic Committee of the Cabinet DAAC Departamento Administrativo de Aeronautica Civil DAINCO Department of National Territories DANE National Statistics Department DNP National Planning Department FALPRO Facilitation Program of UNCTAD FAN Fondo Aeronautico Nacional FFI Flight Facility Inspection Aircraft and/or Equipment FONADE Fondo Nacional de Desarrollo IATA International Air Transport Association ICAO International Civil Aviation Organization IDA International Development Association IDB Inter-American Development Bank INTRA National Transport Institute MOP Ministry of Public Works (up to January 1976) MOPT Ministry of Public Works and Transportation (after January 1976) NPA National Plan of NPAN National Plan for Air Navigation SAM Sociedad Aeronautica de Medellin Consolidada S.A. Satena Servicio de Aeronavegacion a Territorios Nacionales TAC Aerovias del Cesar Ltda. UNCTAD United Nations Committee for Trade and Development UNDP United Nations Development Program VOR Very High Frequency Omni Directional Radio Range Less than 1 FOR OFFICIAL USE ONLY STAFF APPRAISAL REPORT

DOMESTIC AVIATION DEVELOPMENT PROJECT

COLOMBIA

TABLE OF CONTENTS

Page No.

Is THE TRANSPORT SECTOR ...... * ...... **** 1

A. General ...... * ...... *...** * * ..... 1 B. Railways ...... 3 C. Inland Waterways ...... 4 D. Highways ...... 4 E. Ports ...... *...... 5 F. Investments, Regulation and Coordination ...... 6 G. Ban,k Involvement in the Transport Sector ...... 7

II. THE AVIATION SUBSECTOR ...... s ...... 8

A. Subsector Characteristics . 8 B. The Aviation Network and Traffic Growth ...... 8 C. Regulation and Planning ...... 10 D. The Commercial * ...... 11 E. Demand and Market Aspects ...... s. 12 F. Traffic Projections ...... 13 G. Aviation Infrastructure ...... 15

III. THE EXE(:UTINGAGENCIES ...... 16

A. Avi.ationAdministration ...... 16 B. Financial Management ...... o.... %...... 18 C. Accounting ...... 0...... 0...... 18 D. AviLationPlanning ...... 19 E. System Engineering ...... so...... so...... 19 F. System Maintenance ...... 20 G. System Operation ...... 20

IV. THE PROPOSED PROJECT ...... 20

A. Oblectives ...... 20 B. General Description ...... s.o. 20 C. Cost Estimate ...... *.. 21

This report is based on the findings of an appraisal mission which visited Colombia during January-February 1978. The mission comprised Messrs. W.B.R. Zetterstrom (Senior Aviation Engineer), John R. Bowlin (Financial Analyst), Renato Schulz (Country Transport Economist) and Mrs. Jenifer A. Wishart (Economist). The report has been edited by Miss Virginia R. Foster.

This document has a restricted distribuiion and may be used by recipients only in the performance of their officiialduties. Its contents may not otherwise be disclosed without World Bank authorization. - ii -

TABLE OF CONTENTS (Continued)

Page No.

IV. THE PROPOSED PROJECT (Continued)

D. The Project Components ...... 22

(i) Medellin -Rionegro ..# ...... 22 (ii) Cartagena -Crespo Airport ...... 0 ...... , 23 (iii) - Eldorado International Airport ..0...... 24 (iv) Bogota -Second ...... 25 (v) Bogota -Customs Facilitation ...... So. 26 (vi) Flight Facility Inspection (FFI) Aircraft ...... 26 (vii) Technical Assistance and Training ...... 27 (viii) Financial Consultants ...... o ...... 28

E. Execution ...... o .o...o.....&...... 28 Fo Procurement ...... 29 G. Financing and Disbursement ...... 29 H. Ecology...... 29

V. ECONOMIC EVALUATION. ... 30

Ao Medellin ...... o ...... 30 B. Bogota ... 35 C. Cartagena...... 35 D. FFI Aircraft .. 36 E. Overall Project Returns and Benefit Distribution 37 F. Project Risks . . 37

VI. FINANCIAL ANALYSIS ...... o ...... o...... 38

A. Existing Situation ...... o...... 38 B. Financial Objectives ...... o...... 40 C. Financial Plan ...... 42 D. Financial Projections o..o ...... 42

VII. AGREEMENTS REACHED AND RECOMMENDATION ..o...... o...... 45 - iii -

TABLE OF CO'NTENTS (Continued)

Page No. TABLES

1.1 - Intercity Transport by Mode ...... 6 ...... 47 1.2 - IBRD-IDA Involvement in Colombia Transport .48 2.1 - Airport Traffic .49 2.2 - Domestic Traffic Flows 1976 . .50 2.3 - Domestic Air Fares - Colombia .51 2.4 - Visitor and Hotel Capacity - Cartagena (2 pages) 52-53 2.5 - Air Traffic Forecasts (2 pages) .54-55 3.1 - Planned Non-Project Investments, DAAC. 56 4.1 - Cost Estimates (3 pages) ... 57-59 4.2 - Disbursement Schedule .60 5.1 - Vehicle Operating Costs .61 5.2 - Domestic Passenger Time Values, Medellin 1977. 62 5.3 - Economic Rates of Return .63 5.4 - Cost and Benefit Streams .64 5.5 - E'roposed Flight Inspection Program. 65 6.1 - DAAC/FAN Operating Statements .66 6.2 - DAAC/FAN Cash Flow...... 67 6.3 - DAAC/FAN Summary Balance Sheets as of December 31 68 6.4 - DAAC/FAN Statement of Revenues .69 6.5 - D)AAC/FAN Projected Operating Statements .70 6.6 - Mledellin Airport - Projected Operating Statements 71 6.7 - Bogota Airport - Projected Operating Statements .72 6.8 - Cartagena Airport - Projected Operating Statements 73 6.9 - DAAC/FAN Projected Cash Flow .74 6.10 - D)AAC/FAN Projected Balance Sheets as of December 31 75

ANNEXES

I - Outline Advisor Job Descriptions ...... 76-80 2 - Training ...... 81 3 - DAAC/FAN Schedule of Selected Financial Indicators ..... 83 4 - 'Financial Assumptions ...... 84 5 - Selected Documents and Data Available in the Project File ...... 86

CHARTS

World Bank 18901 - DAAC/FAN Organization World Bank 18893 - Implementation Schedule

MAPS

IBRD 13569 - Location of Project Airports IBRD 13570 - Location of Proposed Airport at Rionegro IBRD 13571 - Master Plan of Proposed Airport at Rionegro IBRD 13572 - Proposed Project Works at Cartagena Airport IBRD 13573 - Proposed Project Works at Bogota Airport IBRD 13574 - Second Runway Proposals for Bogota Airport

I. THE TRANSPORTSECTOR

A. General

1.01 Colombia has coastlines on both the Pacific Ocean and the Carib- bean Sea, but this advantage of having two coastlines is offset by the dif- ficulty of movement between the coasts and the interior. The three mas- sive ranges of the Andes Mountains which run from south to north present formidable barriers to communication between the main areas of population, which, until recently, developed as separate and almost isolated communities. Transport investment policy over the past 20 years has been aimed at national integration and at overcoming the situation imposed by topography.

1.02 It was not until the early 1950s that Colombia's largely regionally oriented ground transport system began to evolve into a national system. For a long time, the Magdalena River was the only workable transport route between the central region and the Atlantic coast. Since 1961, the Atlantic Railroad, which was constructed with Bank assistance, has provided an all-weather connection to the north to the port of Santa Marta. Colombia was developing its trunk highway system at the same time. By the early 1960s, construction and upgrading of the Western Trunk Road (Cartagena-Medellin--Pasto), the Eastern Trunk Road (Santa Marta--Bogota-Neiva) and the two main transverse roads that connect the eastern and western trunk roads in the central regicn were substantially complete. The highway system has since been a catalyst of national integration.

1.03 In the early 1950s, roads accounted for about 43% of total freight movements; inL the mid-1960s, that share had risen to about 53%, and, in 1976, although no a6dequate statistics exist, the share was estimated to be close to 70% of all irLterregional and international traffic (60% of domestic traffic). River transpcrt and coastal shipping account for about 30% and railways for another 9% of domestic freight traffic.

1.04 Ovetrall total domestic freight traffic has grown in the last decade at rates close to that of GDP, 6% to 7% p.a. While rail traffic has grown very little, and inland shipping has grown at about 4% p.a., road traffic has been growing faster than the average, around 8% p.a.

1.05 The role of the aviation system (discussed in more detail in Chapter II) has traditiorLally been that of long distance passenger transport, and, prior to the construction of the major highway and rail links, air services provided the only reliable regular connections between many centers. The table on the next page shows available data on the modal distribution of intercity passenger and freight transport. Historical data are given in Table 1.1. -2-

Colombia, Intercity and International Passenger and Freight Transport

1976

Passengers Freight Intercity Transport No. Pass-km Tons Ton-km (000) (million) (000) (million)

Domestic

Rail 4,041 511 2,411 1,159 River negligible negligible 3,269 1,686 Coastal Shipping negligible negligible 2,067 2,494 Road na na na 8,086 1/ Air 3,807 1,534 66 40

International Colombian Foreign Imports Exports Departures Arrivals (tons) (tons) (000) (000) (000) (000)

Sea - 2 1,813 2,342 Road 47 241 94 740 Air 180 279 24 27

1/ Assuming 60% share.

1.06 Over the last 10 years, rail passenger traffic has fluctuated widely and has now regained the mid-1960s level, but only the Magdalena route has offered significant competition to air transport. Strictly comparable data are not readily available, and the recorded rail distances are affected by terrain; however, a broad picture of air and rail passenger traffic on different parts of the network is indicated on the next page. Comparable data for road passenger traffic are not available although recent figures suggest that it would be the predominant mode. Passenger Traffic, Rail and Air

1974

Rail Air, Major Flows Division Pass Average Airport Pass Average (000) Distance (000) Distance Traveled Traveled (km) (km)

Antioquia 498 120 Medellin 912 325

Central 826 155 Bogota 2,713 444

( 499 641 Magdalena 340 338 ( Santa Marta 125 641 ( Cartagena 271 605

Pacifico 1,386 75 Cali 567 708

Santander 535 116 Bucaramanga 170 296

Totals 3,585 131 2,635 478

Passenger transport on the Magdalena river has also shown wide fluctuations, but its volume is small (15,000 passengers in 1974); it is predominantly a short-haul mode, with Magangue and smaller ports accounting for most of the traffic generation.

B. Railways

1.07 The railway system in service consists of about 2,912 km of single- track narrow gauge (0.914meters) Government-ownedlines. The most important routes are those between Santa Marta-Bogota and Santa Marta-Medellin-- the Atlantic Lines -- which carry over 70Z of the total railway traffic. The Pacific Line, which formerly connectedBuenaventura and Cali with the Atlantic Lines via Medellin, is now cut just south of Medellin for about 140 km and is not planned to be reconnected.

1.08 After the Bank's appraisal of the Sixth Railway Project in 1972, the Colombian NaLtional Railways (CNR) started showing improvements. Freight traffic increased from 1.2 billion ton-km in 1972 to 1.4 billion in 1974, and passenger traffic increasedfrom 398 million pass-km to 482 million pass-km for the same period. The working and operating ratios were even better than appraisal targets, ancL,instead of the Col$ 120 million operating deficit in the appraisal forecast for 1974, CNR produced a Col$ 10 million surplus. However, after 1974, CNR encounteredtechnical, financialand management difficultieswhich caused the railways' performance to deterioratein 1975/76. Freight ton-km decreased to 1.2 billion in 1976 because of a countrywideeconomic slowdown and Government restrictionson imports of wheat and fertilizerwhich had been transportedby CNR. The poor availabilityof diesel locomotivesdue to mechanical failure also presented a serious problem. The high incidenceof - 4 -

deraiiments and accidents, the increase in staff costs and the decrease in freight traffic created serious financial difficulties in 1975/76. Government interest in the railways also appears to have weakened during this period.

1.09 In 1977, however, improvements were noted in several areas. CNR's management, which had been weak between mid-1974 and mid-1977, improved under the guidance of a newly appointed General Manager. Freight traffic, which is the major source of income, increased 15% in the first 10 months of 1977 over the corresponding period in 1976. Technical and financial performance also improved. Tariffs were increased substantially in 1977 (freight 52%, passengers 22%), and the total staff was reduced by about 9%. Further action is being taken on these matters in 1978. The Government took certain steps in favor of the railways; the Economic Committee of the Cabinet (CONPES) approved recommendations by the National Planning Department to provide adequate financial assistance to CNR to meet substantial operating deficits and investment requirements, including planning and design for the proposed Saboya-Carare rail link. The main purpose of this link would be to serve coal exports expected to be mined in the vicinity of Saboya; it would also provide an improved connection between Bogota and Santa Marta. The Ministry of Public Works and Transportation (MOPT) is currently carrying out studies leading to the preparation of a National Transport Plan. The studies, to be completed in the latter part of 1978, would define the future role of the railways. The Government generally is of the opinion that the railways have an important role to play in transporting bulk commodities over long hauls.

C. Inland Waterways

1.10 Although the traditional importance of inland shipping has decreased because of the development of rail and of road transport, it is still signifi- cant. Both the Magdalena and the Cauca rivers are navigable, and they account for almost all inland shipping. The Magdalena river carries over 95% of the traffic and, although of difficult navigation, is quite dependable in all seasons to Gamarra (about 470 km from the Barranquilla river-sea terminal); beyond there to Salgar (930 km from Barranquilla), navigation is only season- ally possible. Bulk goods, especially petroleum and fertilizer products, constitute the main freight movement, but there is still competition for this traffic from other modes. Total traffic in 1976 was about 3.3 million tons, of which 74% was petroleum products. Passenger traffic on the river is negligible. Inland shipping has complemented rail traffic to some extent, particularly for goods originating from and destined to the port of Cartagena, which is connected to the Magdalena river by a man-made canal (Canal del Dique). Transshipments to both rail and road can be effected at Cienaga and a number of river ports further upstream; yet, the comparative advantage of road transport vis-a-vis the combined river-rail or river-road movements makes these combina- tions viable for just a few products.

D. Highways

1.11 Colombia has a road network totaling about 51,000 km, of which 21,000 km are national highways under the jurisdiction of MOPT. Almost all the remainder (27,500 km) are the responsibility of the departments. Only about one-third of the national system and about 3% of the departmental roads - 5 - are paved; the rest are gravel or unsurfaced roads. The national highway system includes the trunk road network which connects the main economic centers and ports as well as secondary roads linking smaller towns to the trunk roads. The two major transport corridors run north-southalong the Cauca and Magdalena valleys and are connectedby two paved roads in the central region, one via Ibague-Armeniaand the other via Honda-Manizales.

1.12 There are about 500,000 motor vehicles in Colombia, of which roughly three-quartersare passenger vehicles, mainly automobiles,and the rest are freight trucks. The fleet has grown at a rate of about 9% per annum over the five years 1970-1975. The number of trucks has been lucreasingfaster than the number oE automobiles (12% per annum compared with 7% per annum for automobiles). There are no reliable statistics on the compositionof the fleet, but a survey carried out in 1973 by the TransportFinance Corporation, a Government agency, showed that 60% of the truck fleet has a payload capacity of less than 7 tons, 30% of between 7 and 10 tons and only 10% of over 10 tons. About 90% of the trucks are single rear axle vehicles, and overloadedvehicles are common on the roads. Colombia institutedvehicle weight control regula- tions in 1955, but they have been enforced sparingly. Under the Loan Agree- ment for the Seventh Highway Project (1471-CO),the Government has undertaken to develop and implement a plan of action acceptable to the Bank to control vehicle weights. The proposed plan of action is now being prepared and would be ready for review by October 31, 1978.

1.13 Traffic on the main trunk network of the country has been growing at an average rate of 8% per annum. Traffic volumes on most paved roads are in the 1,000 to 2,000 vehicles-per-dayrange, except around the major urban centers of Bogota, Cali and Medellin, where they amount to about 4,000 to 6,000 vehicles per day. The average composition of traffic is about 30% to 40% automobiles,10% to 20% buses and 20% to 40% trucks. Road transport is heavily regulated in Colombia; entry into the industry is regulated by the provisions of the National Transport Statute, and supply, measured by the number of trucks that can be licensed every year, is tightly controlledby the National Transport Institute (INTRA),the regulatoryarm of MOPT. These rather stringent controls on the supply of trucking capacity have created a situation in which prices, which are not controlled,have increased to comparativelyhigh levels, vis-a-vis other modes of transportand the costs of generating the services involved. The Government is consideringmeasures to facilitate entry into the industry; it is likely that this will be a slow process.

E. Ports

1.14 The principal seaports of Colombia are Cartagena, Barranquillaand Santa Marta on the Atlantic coast and Buenaventuraon the Pacific coast. Between 1966 and 1976, the traffic in the four main ports (about two-thirds imports and one-third exports) increased from 2.1 million tons to 3.0 million tons. With the improvementsof the transit storage and cargo-handlingfacili- ties carried out with Inter-AmericanDevelopment Bank (IDB) financing, the four main pcrts are now able to handle over 4 million tons of general cargo per year. Consequently,there should be no overall capacity problem in the -6-

foreseeable future. Bottlenecksmay occur for certain products requiring specializedhandling and storing facilities,e.g., in Cartagena for the handling of fertilizer,Santa Marta for bulk grain and Buenaventura for coffee.

F. Investments,Regulation and Coordination

1.15 The effort to complete the basic transport network has required a considerableproportion of the country's total investment. Transport repre- sented between 10% and 15% of domestic investmentand about half the Central Government'sinvestment in the late 1950s. When the trunk highway system and the Atlantic Railways were being completed, that proportion rose to more than 60% of Central Government investment. More recently, however, the proportion has been declining;in the late 1960s, it was about 35%, and, since 1970, it has been about 25% of total public investment. In 1975, Col$ 3,200 million were invested in the transportationsector (aroundUS$107 million); of this, about 60% went to road transport, 18% to rail transport, 11% to aviation, 8% to ports and marine transportationand 3% to shipping and inland waterways (see table below). On the whole, this distributionreflects the present economic importanceof the different modes of transport. -

Public Sector Investmentin Transport (1971-1975) (Millionsof Current Col$)

Inland Year Road I/ Rail 2/ Marine Water Air Total 2/

1971 1,956 185 88 44 168 2,441 1972 2,146 289 51 65 172 2,764 1973 2,062 299 61 79 211 2,712 1974 2,360 344 222 100 436 3,462 1975 1,908 540 240 112 350 3,150

1/ Does not include investmentsby departments,municipalities, regional authorities,or private entities. Refers only to infra- structure and not to vehicles, which are included in other modes except air.

Also includes maintenance,which is treated as an investment, although a proportion of expendituresis for salaries for an excessivelylarge work force.

2/ Investmentin 1971 in local currency only; 1972-1975 includes local investmentscontributed by the Government and railways self-financingand foreign investmentcontributed by Bank Loans (551-COand 926-CO).

1.16 Several studies, the last of which was the "MagdalenaRiver Basin Transport Study" (NetherlandsEconomic Institute, 1974), have not had a sig- nificant impact on creating a framework for improved transportcoordination. -7-

Until 1966, when Decree 3160 attempted to tie in the various entities responsible Eor transportationwith the Ministry of Public Works (MOP), no form of central coordinationwas imposed. Before that, responsibilityfor the administrationof the transport system was divided among a number of agencies and decentraLizedorganizations, the largest being MOP itself. Decree 3160 made the MinLster of Public Works an ex-officiomember of the boards of all these agencies. Yet Ministerial control remained limited, and the lack of central coordinationof the different modes persisted.

1.17 More recently,however, coordinationof the modes has been tightened up considerably. Decree 154 of January 27, 1976 restructuredMOP and turned it into MOPT. The objectives,functions and structure of many of the Departments,Divisions and Offices within MOPT and some of the decentralized institutionswere redefined. Article 12 of the Decree refers specificallyto the planning and coordinatingfunctions of the restructuredPlanning Office in MOPT and assigns to it all functionsnecessary to effect intermodalplanning and coordinaltionfor the transport sector as a whole. Moreover, expanded Ministerial powers now include approval of the annual budget and investment programs for all modes except aviation.

1.18 Experiencewith the new MOPT organizationhas been short, and no assessmentof its effectivenesscan yet be made; however, there is now a reasonableexpectation that improvementsin intermodalplanning would come about in the future. An example of this is the proposed intermodaldevelopment study which ithePlanning Office of MOPT is preparing to undertake,with its own staff, during the fall of 1978, of the Llanos area. This study would compare the requirementsof roads, inland waterways and aviation and determine in a general way which mode should be developed to serve which points.

1.19 Since June 1976, the Government of the Netherlands has been pro- viding technicalhelp in MOPT's Planning Office: in defining its activities, in on-the-job staff training and in initiating the preparationof a National Transport Plian,which should provide the base for proper planning.

G. Bank Involvement in the Transport Sector

1.20 The Bank has played an important role in the developmentof Colombia's transport sector. Since 1950, it has lent a total of US$345.1 million. Bank Group financing for the Colombian transport sector is shown in Table 1.2. Over the period 1953-1977,Bank disbursementsaccounted for about 10% of total investmentfor highways and 30% for railways. The Bank started financing transport investmentsas a result of the findings of the 1949 General Survey Mission, which found the transport system in exceptionallybad condition. The Bank has made 12 loans and one IDA credit to the sector. Seven loans and one IDA credit totaling US$225.6 million have assisted constructionand upgrading of the trunk highway network. Two loans for US$40.9 million financed the constructionof the Atlantic Railroad, from La Dorada, near Bogota, to Fundacion,n,ear the port of Santa Marta, a distance of 672 km. Four loans totaling US$78.7 million supported a railway rehabilitationprogram, which helped to provide rolling stock for the new Atlantic Railroad and to rehab- ilitate many sections of track. -8-

1.21 The early highway projects, although beset with delays and cost overruns, resulted in the reconstruction or upgrading of 3,200 km of trunk roads a.d co.aLributedto the development of a unified trunk road system and to the emergence of road transport as the main means of freight transportation. The later highway projects were also delayed in execution because of a general economic slowdown which resulted in delayed provision of local funds, poor contract management and insufficient supervision and coordination by MOP. Nevertheless, the Fifth and Sixth Highway Projects, despite their short- comings, have made important contributions to the trunk road system and assisted in the establishment of better engineering practices and improved contractual procedures. Furthermore, they contributed to the development of the local consulting and construction industries.

1.22 The latest Bank loan (Loan 926-CO) also helped in the rehabilitation of the Colombian Railways. The ongoing project had some difficulties mainly due to changes in the management; however, significant improvements have been noted recently (para 1.09), and the Government is now considering long term arrangements for the development of the Railways.

1.23 A transport sector mission visited Colombia between March 27 and April 14, 1978 to review recent developments and future requirements of the sector and to outline areas suitable for future involvement of the Bank.

II. THE AVIATION SUBSECTOR

A. Subsector Characteristics

2.01 In recognition of the major problems caused by the topography to surface transportation, Colombia very early turned to aviation for at least a partial solution and, in 1919, established what is now the second oldest continuously operated in the world, Avianca (Aerovias Nacionales de Colombia, S.A.), which serves international and domestic points. Two other Colombian firms are currently engaged in international service, Aerocondor (Aerovias Condor de Colombia, S.A.) and SAM (Sociedad Aeronautica de Medellin Consolidada, S.A.). Eleven foreign airlines serve Colombia, and there are 10 additional scheduled domestic airlines. Supporting these scheduled carriers are many charter and non-scheduled foreign airlines plus a domestic fleet of about 800 non-scheduled commercial, general aviation and private aircraft.

2.02 Air is a major passenger transport mode for both international and inter-city travel (para 1.05), and, while air freight represents only a very small proportion of the total transport operations, air exports are among the fastest growing (para 2.08).

B. The Aviation Network and Traffic Growth

2.03 One-third of domestic air passengers travel between the principal cities and Bogota; the four largest airports -- Bogota, Medellin, Cali and - 9 -

Barranquilla -- together handle two-thirds of all traffic. Traffic flows and airport traffic data are shown in Tables 2.1 and 2.2. The domestic air passenge& iiarket is dominated by business travel; surveys put the propor- tion between 50% and 65% on the major routes. Long term growth in the domestic passenger market has averaged 4% p.a. over 1967-1976 compared with a 2.7% p.a. growth in GNP per capita, and 2.8% p.a. in population. Domestic passenger traffic has grown by 13% p.a. on average since 1974.

2.04 Domestic freight tonnage has declined in recent years although, in terms of ton-km, the volume has remained stable. Most noticeable has been the decline in freight handled at Bogota, reflecting the decline in the volume of engine parts carried between Bogota and Medellin, following improvements in road conditions. A further contributing factor has been the spread of direct international flights, which avoid domestic transshipment of air exports and imports.

2.05 International passenger and freight flows are similarly concentrated over a few imnportant routes as shown in the following table:

International Air Transport Flows

1976

Passengers Freight (tons) Foreigners Exports Imports Departing Arriving

North America 64 23 68 72 Central America 12 6 11 9 Caribbean 2 4 11 9 South America 15 55 12 12 Europe 7 10 9 7 Other 2 - -

Total 100 100 100 100

2.06 Foreign tourism has grown at an annual rate of 19% since the late 1960s, with Venezuelan and Ecuadorian travel (mostly by road) showing partic- ularly high growth since 1973. European and North American travel to Colombia (by air) is averaging 11-12% annual growth. Unlike the domestic air market, foreign air travel to Colombia is mostly for recreation (62%), with only 15% for business. The remaining 23% of travel takes place for health, education and family visits. International passenger traffic accounts for 12% of total passenger movements.

2.07 Air freight exports (Table 2.1) have grown at over 20% p.a. since 1966, and air trade with North America has grown at nearly 30% p.a. Around 80% of all export freight uses Bogota airport, and most of that consists of perishable items such as cut flowers and tropical fish. Colombia has a well established major market in the United States and now supplies 6% of the fresh flower imports of Western Europe. Small but rapidly growing industries relying on air freight have also sprung up around Medellin and Cali (see table following). - 10 -

Air Freight Exports

1975

Bogota Barranquilla Medellin Cali Tons Col$ Tons Col$ Tons Col$ Tons Col$ (million) (million) (million) (million)

Cut Flowers 10,108 531.9 - - 1,240 61.5 87 4.1 Ornamental Fish 134 33.9 - - - - 1 71.8 Meat 1,680 61.6 ) - - 50 2.3 3,424 Other 7,313 na ) na 1.105 na 766 na

19,235 na 3,424 na 2,345 na 904 na

2.08 Air freight imports are about 10% less than exports and have been growing at a slightly higher rate (22%) and include, predominantly, manufactured goods and specialized items. About half of the air freight -- domestic and international -- is carried in all cargo aircraft.

2.09 East of the Andes in the Llanos and Amazonas regions, air services provide the only year-round connections for many centers. Air services are provided by Satena -- a military airline set up to provide services in remote areas -- and a number of smaller airlines serving the more profitable routes. Overall traffic levels in the region are low, about 4% of total domestic passengers and 6% of freight. About 60%, by weight, of the traffic in these regions is freight, chiefly imports to these regions of food, seeds, drugs and tools. An overall transport strategy for this region is to be studied (para 1.18).

C. Regulation and Planning

2.10 The Departamento Administrativo de Aeronautica Civil (DAAC) formulates and then administers Government policies for the aviation subsector in addition to planning, operating and maintaining the airport and air navigation facility network and setting and enforcing standards through personnel licensing, aircraft registration and specification of procedures. Chapter III examines the operations of DAAC in more detail, and the following paragraphs discuss those functions particularly relevant to airline performance.

2.11 DAAC is advised on policy and regulatory matters by the Superior Council of Civil Aeronautics, which includes representatives of other relevant public bodies such as the Ministries of Foreign Affairs, Finance, Public Works and Transportation, Department of National Planning and the . At its regular weekly meetings, this Council receives submissions and representations from the airlines and other interested parties on matters such as fares, routes, fleets and user charges. The Director of DAAC, however, has final responsibility for formulating and implementing policies for the orderly development of aviation. Under its general mission to "direct, regulate, coordinate and control" aviation activity in Colombia, DAAC has specific regulatory authority only in the matters of setting both user charges and airline tariffs. However, under its general direction, and - 11 - through its responsibilitiesto provide and operate airport and airways facilities,DAAC exerts a wide ranging influence on commercialaviation activities.

2.12 The combinationof responsibilitiesfor infrastructureand those affecting traffic developmentpotentially provide the opportunity for the preparation of coordinatedplans reflecting traffic requirementsand the broad scale of resources available. However, until recently, the DAAC Planning Department played only a minor role in investment planning, and the use of economic and.financial, as well as technical, tests of facility requirements was not widely practiced. As a result, insufficientconsideration has been given to the priority of projects, and past investment programs have exceeded the funds available (Chapter III and paragraph 5.33). Also, there has been no regular review, through the planning process, of the effects of regulatory practices On the aviation system and its costs (paras 2.15-2.17).

2.13 Over the past 18 months, the Planning Department developed a central role in investmentplanning and consequentlybecame overburdenedby these new responsibiliLties.However, with the reorganizationof DAAC approved in 1977 (para 3.06) and the technical assistance in planning envisaged in the project (para 4.39). a strong planning and research group would be organized, consoli- dating improvementsalready made.

D. The CoimmercialAirlines

2.14 The airlines in Colombia are all privately owned and, in general, efficientlymanaged. The three trunk airlines, Avianca, SAM and Aerocondor, serve the major domestic and internationalroutes, while the ten smaller airlines operate supplementaryservices. The main inter-city passenger services are provided by -100 or -B aircraft; other services are offered by Fokker F-27, De-HavillandDHC-6 and a variety of older aircraft.

2.15 Unlike the situation in many countries, the domestic airlines offer different fares over the same route sectors and hence compete, within the regulated environment,in terms of both fares and frequencies. Domestic air fares in Colombia are very low--both in relation to costs and by comparison with other countries (Table 2.3). Two of the major airlines have submitted applicationsto DAAC for fare increases averaging 50% over the next six months to cover increased operating costs. The last fare increase (approvedin 1977) of around ].4%was in response to cumulative cost increases from 1974.

2.16 The policy of maintaining low domestic fares and tariffs to facilitate aviation developmentseems now to be counterproductive.Low fares, combined with rising financing rates, make new domestic capital ventures unattractive to investors and financing of new aircraft for internal services uneconomical for the airlines. Maintenance costs are particularlyhigh because of a combinationof high import and sales duties on spare parts, and, because of a relatively inefficient labor force, much of Avianca's formerly growing business in providing maintenanceand overhaul services for foreign airlines has now been lost. The three major carriers are maintainingprofitability through intensive equipmentuse with high rates of aircraft utilizationand load factors of about 70%. The difficulty in raising capital or financing on suitable terms was a major factor in poor aircraft choices for three airlines: SAM, which retired its Electra fleet in favor of ex-AviancaB720s; and Aerotal - 12 - and TAC, which purchased ex-LAN Chile Caravelles. All the airlines, however, are constrained in their ability to replace older, costlier aircraft with more efficient types. It is estimated that fare levels on major services are now some 6-25% below the economic costs to the airlines and should be increased, both to maintain efficiencyin current service levels and to provide a base for future expansion. The environment in Colombia tends to ensure efficiency in domestic operationsand high equipment use factors.

2.17 Since the continued developmentof the industry depends upon adequate pricing of its services,a review of current tariff policies is necessary. This matter was discussed with DAAC at the time of negotiations. The Bank received assurances that DAAC would, with technicalassistance to be provided to its Planning Department under the project (para 4.39), undertake a review of its tariff-settingprocedures and establish improved guidelines for approving fare adjustments. It was agreed during negotiationsthat the review of the guidelineswould be submitted to the Bank for comments by January 1, 1980 and that the agreed results would be establishedby June 30, 1980.

2.18 The same factors are not so restrictingon the main international services. Both Avianca and Aerocondor have recently introducedwide-body aircraft in response to competitivepressure, and both are planning additional aircraft within a few years. On the major routes, Colombian airlines have adopted a common fare structure with other carriers, and, overall, achieve a 50% market share in passenger traffic and almost 70% of the freight traffic.

E. Demand and Market Aspects

2.19 Passenger demand on the main domestic routes has been largely unaffected by the developmentof the primary road system, and growth is much more closely aligned with population and income trends. For the shorter services, however, there is some indirect evidence that road transportopera- tions have become relativelymore important,with air services tending more and more to concentratetheir primary role upon long distance operations. Similar trends are observable in domestic air freight flows. These trends are indicated in the following table:

Indices of Domestic Air Traffic

Passengers Freight % Passengers % Passengers % Freight % Freight on majoy1 on minor on majorA on minor routes routes routes routes

1967 1976 1967 1976 1967 1976 1967 1976

Bogota 50 51 19 12 60 54 17 16 Barranquilla 51 74 35 15 82 86 13 7 Cali 72 78 25 18 64 75 35 19 Medellin 57 62 29 23 58 60 31 23 Average Percent Change +15.2 -37.1 +4.2 -32.3

/1 Between the four cities listed.

2.20 Passenger growth on the main routes has been substantiallyabove the overall national trend. For Colombia as a whole, traffic is increasingat - 13 - around 13% per year after a relatively stable period between 1970 and 1974, which is reflected in the table on the preceding page. Passenger traffic between BogotaL and the three next largest cities has grown at a long term annual rate of over 7% and at 18% p.a. since 1974; traffic among the three cities themse].vesshows a long term growth of 6% with increases of 13% per year since 1974. Cartagena, a relatively small city in the Colombian setting, generates a disproportionately high demand for air travel because of its attractiveness to domestic holiday-makers and has exhibited a long term growth trend of around 9% with recent increases of around 16% p.a. Traffic on minor routes shows slide fluctuations from year to year and, particularly on the Atlantic Coast:,has declined significantly.

F. Traffic Projections

2.21 Forecasts for domestic air passenger traffic at the project airports (see table beLow), prepared by the consultants (Restrepo y Uribe Ltda. for Bogota and Cartagena and Compania de Estudios e Interventorias, CEI Ltda., for Medellin) and modified during appraisal, are based on separate analyses of growth trends, relationships between traffic, income and population growth, and the overall share of each airport in Colombian air traffic. The adopted forecasts are a blend of five different projection methods and most nearly reflect the average between the upper and lower ranges. The effect of this forecasting method is to even out the very high growth rates since 1974, and, for the next two to three years, traffic would probably exceed the forecast trend. For Colombia as a whole, forecasts are based on estimates for other airports which, together with Cartagena, Bogota and Medellin, handled 70% of all passenger traffic in 1976.

Forecasts of Domestic Passengers and Cargo

Passenger Departures and Cargo Handled

Bogota Medellin Cartagena Colombia

5assengers Cargo Passengers Cargo Passengers Cargo Passengers Cargo (000) (000) (000) (000) (000) (000) (000) (000) tons tons tons tons

1976 (Actual) 1,249 61 568 13 185 7 3,848 66 1980 1,699 69 685 14 270 7 5,080 78 1990 3,295 109 1,005 21 582 12 9,160 121 2000 - - 1,459 25 - - - -

Average growth over forecasi: period 7.2% 4.3% 4.1% 4.8% 8.5% 4.0% 6.4% 4.4%

2.22 Domestic cargo projections are made difficult by the changing market patterns, and forecasts have been based on an assessment of trends for different city pairs with, for individual airports, an allowance for the increasing volume of transshipped cargo. While, on many routes, cargo traffic is still declining, the decline appears to have been arrested on others. Particularly for Cali, Bucaramanga, Cucuta and San Andres, volumes for major flows have been increasing steadily over the past three to four years. On - 14 - this basis, it could be expected that, within the next few years, other routes would also reach a basic level reflectingwholly domestic air transport requirements,from which an overall but slow growth would occur. For the project airports and Cali, projectionswere made for each major cargo flow, and forecasts for Colombia as a whole are built from the overall trends in main flows for these and other airports.

2.23 Forecasts of domestic aircraft traffic (see table below) are based on airline plans and projected fleet compositionin key years of the forecast period, which, with assumed load factors, lead to a trend in average passengers per aircraft. In forecastingaircraft traffic, allowances are made both for the availabilityof capacity on domestic sectors of internationalservices and for freight carried in the holds of passenger aircraft.

Forecast of Domestic Aircraft Traffic

Passenger and Cargo Aircraft Movements

Bogota Medellin Cartagena Colombia No. Av. pass No. Av. pass No. Av. pass No. Av. pass

1976 (Actual) 46,133 54 32,174 35 12,443 31 111,430 /1 37 1980 51,850 62 38,970 35 10,970 41 127,300 40 1990 84,100 71 51,300 39 18,840 52 190,500 48 2000 - - 60,800 48 -

/1 1977

2.24 Forecasts for internationaltraffic were made in a similar way, adjusting trend projections for each city for its share in the overall inter- national market, and basing aircraft movement forecasts on projectionsof fleet compositionand average loads. For Cartagena, forecasts of international charter traffic were made using a conservative3% growth, consistentwith accommodationlevels that would be available in 1980 (Table 2.4), and assuming that the DC-8 and B707 aircraft to be used on these services are fully occupied. The official forecasts of the CorporacionNacional de Turismo (CNT), used as a check against the adopted forecast, project foreign tourism to all destina- tions in Colombia at an average growth of 14% p.a. up to 1985, and, to Bogota, Cartagena and Medellin, at 11.1% p.a., 29.6% p.a. and 26.5% p.a. over the next three years respectively. On this basis, it is expected that charter traffic would represent 60% of all foreign visitors to Cartagena in 1980 compared with 75% in 1977.

2.25 Traffic forecasts are summarizedin the following table, and further details of the forecasts for project airports are given in Table 2.5. - 15 -

Summary Forecasts of International Traffic

Departing Cargo Aircraft Passengers Tons Movements (000) (000)

Bogota 1976 (Actual) 296 36 12,217 1980 434 67 14,500 1990 998 175 24,960 Average Annual Growth 9.1% 11.9% 5.2%

MedellirL 1976 (Actual) 42 4 1,357 1980 70 10 2,200 1990 188 41 4,900 2000 392 107 8,000 Average Annual Growth 9.7% 14.7% 7.6%

Cartagena 1976 (Actual) 23 - 381 1980 36 - 570 1990 76 - 1,230 Average Annual Growth 8.7% - 8.7%

Colombia 1976 (Actual) 494 51 23,170 1980 736 106 25,760 1990 1,700 288 33,720 Average Annual Growth 9.2% 13.2% 2.7%

2.26 The lowest of the projection methods, reflecting arithmetic traffic growth trends between 1966 and 1976, was used to test the sensitivity of the economic analysis to traffic projections. The average annual compound growth rates implied in this projection are 4% for domestic passengers and 8% for international passengers, compared with the best estimates of 7% for domestic passengers and 10% for international passengers.

G. Aviation Infrastructure

2.27 Because of the wide variation in temperature, rainfall, elevation,, soil condition and traffic, the 70-odd airports in Colombia vary widely in their development and condition. In general, those in the western half of the country (within and west of the mountains) are more fully developed than those in the east (in the Llanos and Amazonas).

2.28 At present, there are seven airports in mainland Colombia, with one additional on the island of San Andres in the Caribbean Sea, which are primarily domestic airports but also serve international flights. Of these, in accordance with the National Plan for Airports, Cali, San Andres, Barranquilla, Leticia and Bucaramalnga are relatively new or expanded, but the airports at Bogota and Cartagena need moderate improvements, and Medellin requires a replacement airport. All eight airports are paved and can accept, either readily or with some degree of restriction, modern jet aircraft. - 16 -

2.29 The rest of the airports in Colombia range from semi-improvedgravel strips to cleared areas on relatively ungraded fields. These latter are typical ot the airports in the Llanos and Amazonas areas where air service is the most nearly continuous mode of transportationsince it operates through- out the year except for periods of extended rain, when the dirt runways become soft. Traffic at these airports is light, and the aircraft used are generally the smaller and older piston engine transports.

2.30 Air navigationalaids and communicationsystems in Colombia are minimal and, at present, exist only at the major airports. Regional air traffic control is handled by Bogota, but each of the major airports has its own control tower for area traffic. Many of the newer minor airports throughout the country have been provided with control towers, but they are not operated because of lack of staff. Three radar systems, which will provide coverage for most of the country, are in the process of being installed, but this system will not be fully operationalfor another five years. The navigationalaids that do exist are rarely calibratedand, as a result, are not fully reliable (paras 4.34-4.40).

III. THE EXECUTING AGENCIES

A. Aviation Administration

3.01 Aviation in Colombia is governed by DAAC, a governmentalagency directly responsible to the President of the Republic, which was established by Decreto Ley 3140 of December 26, 1968. This law also established the Fondo Aeronautico Nacional (FAN), which functioned as the financial and investment entity in support of DAAC. During the ensuing years, it was found that the organizationset forth in Law 3140 was not adequate because the administrative divisions between DAAC and FAN were not well defined, and a new law was passed which corrected these shortcomings(Law 3, January 21, 1977).

3.02 DAAC's primary areas of responsibilityare the setting of aeronauti- cal policy, control of aeronauticalcommunications, execution of studies and works (with financing through FAN), administrationand operation of airports and aeronauticalinstallations, ensuring safety and efficiency in the air transportationindustry, and establishingthe level and structure of airport user charges, passenger fares and freight rates. These functionsare performed by a total staff of about 3,000 employees,of whom 800 are in the headquarters in Bogota and 2,200 work throughout the system at the regional airports. The technical staff (professionals,technical aviation inspectors,instructors, air traffic controllers,communicators, meteorologists, flight inspectors, pilots, engineers and technicians)consists of 1,135 people, of whom 335 are located in Bogota and 800 are at the outlying airports. All of these areas of expertise require improvementto meet the increasing demands placed on DAAC by the growing civil aviation industry. This need has been recognized by DAAC, and training for key technical staff is under way, but limited because of financial constraints. Funds for additional training are provided in the project (para 4.40). - 17 -

3.03 FAN is an autonomous public entity with legal personality, which func- tions in the same manner as the National Highway Fund of the Ministry of Public Works and Transportation, with the exception that FAN may not contract with individuals. It is essentially a bank account for DAAC, with all FAN personnel requirements being met by DAAC staff. The Director of DAAC, who is appointed by the President of the Republic, is the legal representative of FAN and also its administrator. FAN's primary function is the provision of funds for studies, construction, maintenance, improvements, operations, supervision of construction and acquisition of movable and fixed assets in accordance with the established needs of DAAC. However, before any project may be undertaken by DAAC, FAN must satisfy the Ministry of Finance, after a review by the National Planning Department (DNP), that adequate financing would be available to ensure an orderly progress and completion of the project. Law 3 provides the following sources for funds for FAN: (a) from the national budget, (b) sale of property, (c) financing through local or foreign debt (which may be guaranteed by the Government), and (d) revenues from operation of DAAC. The primary source of funds is the collection of revenues for services provided by DAAC, of which the most important are the airport passenger fees and landing fees, representing 86% of total revenues in 1977. A more detailed explanation of the relal:ionshipof DAAC and FAN is given in Chapter VI.

3.04 Law 3 provides for the transfer of land owned or to be acquired by DAAC to the National Government without charge. This was an administrative move only to avoid local taxes. However, DAAC is still responsible for administering this land, and , if no longer required for aeronautical purposes, FAN would receive the proceeds of the sale of such land in accordance with Articles 8 and 13 of Law 3.

3.05 In the past, DAAC/FAN suffered from poor financial management which resulted in heavy investment in navigational aids and communications equipment when the associated debt service for this equipment could not be covered by its own revenues. Contracts were also let to construct terminal buildings at Cartagena and Barranquilla. Construction of the terminals was only partially completed when the funds were exhausted. In 1976 and 1977, the Government provided additional budget funds to pay for the debts incurred and payable during this period. As a result, after a long delay, installation of the equipment and construction of the buildings are proceeding.

3.06 An important provision of Law 3 empowered the President of the Republic to make the following changes:

(a) Reorganization of DAAC, which, after considerable time and effort, hbas been accomplished and has already improved the performance of DAAC. The new organization is shown on Chart 18901.

(b) Establishment of a career program for technical personnel, with a special emphasis on selection and salary review; this program is under way and will make for a stronger technical group by keeping compensation in line with job responsibilities.

(c) IReview,and changes as required, for the compensation of employees. This has been carried out; Col$ 70 million were allocated for l-hispurpose for 1978. - 18 -

B. Financial Management

3.07 DAAC/FAN operates under budgetary systems whereby a general budget of anticipated revenues, borrowings, maintenance, investment and debt service is developed and submitted to DNP for approval. Once the budget is approved by DNP, it is presented to the Ministry of Finance for approval. The annual budget for DAAC/FAN for salaries and miscellaneous expenses must be reviewed and approved by the Ministry of Finance only. Any unusual expenditures outside the budgets which might arise during the year must receive prior approval from DNP and the Ministry of Finance as appropriate.

3.08 Under present arrangements, FAN receives all revenues generated from services provided by DAAC. DAAC does not have any direct revenues. FAN transfers up to, and not more than, 10% of its estimated total annual revenues to the Ministry of Finance, which, in turn, provides FAN with resources to cover salary requirements and miscellaneous expenses (utilities, office supplies and cleaning materials) of DAAC. The balance of the FAN revenues is used to meet the maintenance, investment and debt service requirements of DAAC. Capital items, both current payments and debt service, are normally paid by revenues collected by FAN. When FAN is not able to cover all of its financial obligations, the Ministry of Finance provides budget allocations to DAAC/FAN to make up the difference. Any excess revenues for the fiscal year remain with FAN.

3.09 Because of inadequate collection procedures, it is estimated at the present time that possible revenues for the passenger departure fees are being only 80% realized for domestic and 90% for international fees (para 6.08). Additionally, no revenues are collected for services provided at approximately 50 of the 80 airports under DAAC administration. This situation exists because DAAC feels that the level of services currently provided does not justify charges, and that the lack of charges at these airports will help to stimulate air transport in the remote regions of Colombia and provide an important social service. Such an approach is considered reasonable at certain airports since this is the only practical mode of transportation for most of the Llanos, Amazonas and Pacific coast regions.

C. Accounting

3.10 DAAC has recently brought its financial statements up to date through the fiscal year ended December 31, 1976. The new balance sheets reflect a revaluation of assets. The financial statements for the fiscal year 1977 have been completed and were approved by the Government in June 1978. However, the statements have not been received by the Bank and a proforma balance sheet for 1977 was obtained and is shown in Table 6.3. This is the first time in the history of DAAC that this task has been accomplished in a timely manner.

3.11 In an effort to strengthen the accounting capability, DAAC is preparing to undertake a study of its accounting system and, at the same time, to determine if the volume of activity warrants computerization. This study would be conducted by a consultant with a loan from Fondo Nacional de Desarrollo (FONADE). During negotiations, the Government confirmed that this study would be completed by July 1, 1979, that the Bank would be consulted about the implementation of the recommendations of the study and that the recommenda- tions accepted would be implemented by December 31, 1979. - 19 -

D. Aviation Planning

3.12 DIAC has been operating on a ten-year National Plan for Airports 1970-1979 (IPA), which was substantially modified in 1973 by the National Plan for Air Navigation 1973-1983 (NPAN). The NPAN recommended a first phase development (1973-1976) which would provide a navaid system approximately five times larger than the navigational aids and communications component of the orginal NPA.. Contracts were entered into without determining where the funds for payment or installation would come from. Later, DAACengaged foreign consultants to establish priorities for the optimal installation and utili- zation of the equipment. Their report is now being studied by DAACto deter- mine how installation can proceed within funds available. Since this high- lighted the weaknesses within the Planning Department of DAAC, the project provides for the strengthening of this department further described in paragraph 4.39.

3.13 Coordination of aviation plans with other Government programs is maintained through review by DNP, and, for proposals in the Llanos/Amazonas regions, by joint planning efforts with the Department of National Territories (DAINCO), which is responsible for coordinating all public programs in these areas. Informal contact is maintained with the Sectoral Planning Office of MOPT, and these ties would be strengthened during the forthcoming transport study for the Llanos area (para 1.18). The Sectoral Planning Office has no formal authority to review aviation budgets, and there seems to be no advantage in altering the present arrangements.

3.14 DAAC's overall investment program to 1983 was reviewed by the mission and adjusted, by agreement, in the light of projected cash requirements. Overall, the program includes expenditures of Col$ 9,243.4 million, of which the project accounts for 63%. Non-project investments (Table 3.1) contain complementary improvements at other domestic airports, including completion of the terminal buildings at Cartagena and Barranquilla and the provision of facilities for domestic services of other airports. Overall, civil works amount to 51% of the planned non-project items, with the installation program for navigational aids accounting for an additional 40%. The program reflects the implementation of the national plans for airports and air navigation, and investments in 1978 and 1979 are largely the completions under existing contracts. New projects included in the 1980-1983 period are justified in the light of expected traffic growth and changes in service patterns.

3.15 It was agreed during negotiations that the non-project investment plan would be reviewed annually by DAACand the Government,in consultation with the Bank, until the closing date of the project.

E. System Engineering

3.16 TCheelectronic and airport engineering sections of DAACare suitable for small projects but require assistance when large projects are attempted. To solve their inadequacies, DAACcustomarily engages consultants. However, for very large projects, DAACengineers would be unable to provide the necessary supervision of the consultants (para 3.21). - 20 -

F. System Maintenance

3.17 With the rapid growth of the system, DAAC is unable to maintain its navigational aids and communication equipment adequately. In some instances, equipment is installed but has never been placed in operation, a situation which could cause early deterioration due to corrosion. With the introduction of new equipment types, staff hiring and training has become a large problem (para 3.21).

3.18 Airport maintenance is also neglected (para 3.21). Funds are seldom forthcoming to provide proper preventive or corrective maintenance in a timely manner. To help solve this problem, funds have been included in the financial projection to provide adequate maintenance (para 3.21 and Table 6.5). It was agreed during negotiations that adequate maintenance in accordance with accepted practices and good engineering concepts would be provided at all facilities of DAAC/FAN.

G. System Operation

3.19 There are not enough personnel engaged in air traffic control. Generally, those at the major airports are properly trained, but outlying airports lack trained personnel. Even the personnel at the major airports are in need of refresher courses in modern jet aircraft procedures and in the use of new types of navigational aid equipment (para 3.21).

3.20 The enlargement of the airports is also causing a problem because of the lack of adequate airport operational and management personnel.

3.21 These problems (paras 3.16 through 3.20) would be addressed in the proposed project through the provision of technical assistance experts and training (paras 4.39 and 4.40).

IV. THE PROPOSED PROJECT

A. Objectives

4.01 The project, consisting of the highest priority items with major foreign exchange components in the five-year investment plan (para 3.14 and Table 3.1), is designed to improve the flow of air traffic within Colombia. To do so, it would remove the constraints to air traffic growth at the airports of Medellin, Cartagena and Bogota, provide flight calibration equipment for use on the airways throughout the country and strengthen the administration, planning and financing procedures of DAAC.

B. General Description

4.02 The project, to be implemented by DAAC over a five-year period, would consist of: (a) lengthening and strengthening the runway at Cartagena, enlarging the aircraft apron, improving landside access, providing automobile parking areas, improving the drainage and providing navaids and communications; (b) strengthening taxiways and existing aircraft aprons at Bogota, enlarging the international and domestic passenger terminal fingers, improving the cargo facilities, enlarging the passenger terminal aprons (including the necessary relocation of the access road to the military aircraft area), enlarging the automobile parking area and providing additional navaids; (c) providing a complete new airport at Rionegro as a replacement for the existing Medellin - 21 -

airport, to consist of a 3,000 m runway with parallel taxiway, terminal building and tower crash, fire and rescue (CFR) building and equipment, general aviation and cargo areas, automobile parking areas, access road and navaids and communication equipment; (d) providing technical assistance and training for DAAC and consultants for financial, airport planning and customs assistance; and (e) providing flight and ground air navigational calibration equipment (Map IBRD 13569).

C. Cost Estimate

4.03 The total estimated project cost, including contingencies, is US$97.8 million. The foreign exchange component is US$61.3 million, or about 63% of the total project cost. The local component includes import taxes and duties.

4.04 The cost estimate shown below (in prices expected at the end of June 1978) is categorized by type. A detailed itemization of the project components is given in Table 4.1. % Foreign Col$ (million) US$ (million) Component Local Foreign Total Local Foreign Total

Airport Construction

Land Acquisition 45 45 1.2 1.2 0 Civil Works 640 972 1,612 17.0 25.8 42.8 60 Buildings, etc. 212 191 403 5.6 5.1 10.7 47 Lighting Navaids and Equipment 50 205 255 1.3 5.5 6.8 80 Engineering 82 82 164 2.2 2.2 4.4 50

Technical Assistance and Trainiqg 7 41 48 .2 1.1 1.3 87

Consultants 13 27 40 .4 .7 1.1 67

FFI Aircraft,,Equipment Spares and Training 56 168 224 1.5 4.5 6.0 75

SubtotaL 1,105 1,686 2,791 29.4 44.9 74.3

Physical Contingency (10%)110 169 279 2.9 4.5 7.4

Price Contin4ency 1/ 945 1,824 2,769 4.2 11.9 16.1

Total 2,160 3,679 5,839 36.5 61.3 97.8 63

Source: Consultants, DAAC and IBRD Mission, February 1978.

1/ See para. 4.07. - 22 -

4.05 The cost estimates for the construction portions of the project were developed by the consultants, based on nearly complete final engineering; they are considered reasonable and reflect recently awarded contracts for similar work. They were updated to the end of June 1978 during appraisal. The estimates for the other components of the project were developed after verifying costs with the industry. Construction at Cartagena and Bogota would take place on land already owned by DAAC with the exception of the automobile parking areas at Cartagena. This land is now in the process of being acquired. Most of the land at Rionegro has been acquired by DAAC, and the rest is now in process of acquisition. Land acquisition is not expected to delay the project.

4.06 Physical contingencies amounting to 10% of all items have been included in the cost estimates.

4.07 Price contingencies were estimated separately for the local and foreign components. The annual rate of price increase for the local component was estimated at 26% in 1978 and declining to 12% in 1981 and subsequent years. The annual rate of price increase for the foreign component was estimated at 7.5% in 1978 and 6.5% in 1980 and thereafter. It was also estimated that the relationship between the US$ and Col$ would be US$1 equals Col$ 37.6 in 1977 and increase to Col$ 75.4 in 1983.

D. The Project Components

4.08 The project would consist of the following eight components.

(i) Medellin - Rionegro Airport (Map IBRD 13570)

4.09 Background and Preparation - The existing airport, Olaya Herrera (elevation 1,506 m), is in a narrow valley over 1,000 m below the adjacent mountains. There is a hill at the south end of the single north-south, 2,500 m runway which forces all heavy aircraft operations to land from the north and take off to the north. This greatly reduces the capacity of the runway. In addition, the city is located at the north end of the runway, and all low level turns required during landing or takeoff operations occur over heavily built-up and populated areas; operations are forbidden when winds above 10 knots blow from the north, when a cloud base is less than 1,847 m above the runway surface (less than 3,353 m elevation), when visibility is less than 9.65 km, or during the hours of darkness.

4.10 Because of the significant operating restrictions which result from these terrain and weather conditions, DAAC engaged a local consulting firm (whose foreign partner was an aviation expert) to select a site for a new airport which would have an unrestricted 3,500 m runway capability. A new site was chosen in a high valley about 23 km to the east of the existing airport near the community of Rionegro at an elevation of about 2,200 m. With the aircraft in the present commercial air fleet in Colombia and the temperatures, expected runway gradient and elevation, the new site, while designed for domestic operations, would allow unrestricted non-stop operations from Medellin to New York for all but the smallest aircraft in the fleet. Such operations are expected within the forecast period.

4.11 The consultant is now in the process of preparing final engineering drawings and contract documents for the proposed new airport. - 23 -

4.12 Proposed Development- The airport would consist of a 3,000 m runway with parallel taxiway constructedwith a flexible pavement. There would be a 20,000 m2 passenger terminal building with an aircraft apron capable of holding six large commercial passenger aircraft. In addition, there would be the following supporting facilities: a general aviation area with apron, a cargo shed with apron, a CFR building with equipment, a control tower with equipment, automobile parking areas, air navigationalaids, approach and airfield lighting and all necessary ancillary works such as drainage, fencing, public services and internal access roads (Map IBRD 13571).

4.13 Future Use of Existing Airport - Since the existing airport, Olaya Herrera, is so poorly located for aviation purposes and is occupying much needed land for the expansion of the City of Medellin, an agreementwas reached during negotiationsthat would be closed upon completion of the new airport at Rionegro, the land sold, the proceeds of the sale turned over to FAN, and that, prior to the sale of the land, a study of potential uses of the site would be made by the Government or its consultants, in consultationwith the Bank, by the beginning of 1981.

4.14 Access Road - A portion (about 33 km) of the Bank--financedhighway between Medellin and Santuariowould be used for access to the general airport area. A 10-km airport access road would be constructedas part of the project from this highway to the airport site. During negotiations,the Government confirmed that the portion of the airport access road outside of the airport property line would be turned over to MOPT for ownership and maintenance.

(ii) Cartagena - Crespo Airport

4.15 Background and Preparation - Since 1974, hotel capacity in Cartagena has trebled. A new 600-bed hotel is due to open in 1979, largely catering to and dependent upon air charter traffic from the U.S. midwest and Canada. Avianca has recently opened an office in Vancouver to promote tourism from the west coast of North America, and traffic rights for scheduled services to the eastern region of Canada are being negotiated. The short (2,245 m) and understrengtbrunway increases operating costs for these aircraft by requiring enroute stops for fuel that cannot be lifted at Cartagena. The small and weak aircraft apron also increases costs because of increased turnaround times necessitatedby remote aircraft positioning.

4.16 Proposed Development - The runway would be strengthenedby means of an overlay and lengthenedby 355 meters. Since there is no parallel taxiway, a turnaround loop would be constructedat the south threshold of the runway both to facilitate the turning of aircraft proceeding to the end of the runway for takeoff and to act as a holding apron for aircraft waiting for other aircraft to land so that they might take off. The existing aircraft apron in front of the terminal building would be removed and replaced with a stronger and larger apron suitable for the aircraft types expected. Although the existing terminal is now being replaced by a modern building (the domestic section is complete and in use), no provision has been made for landside access or for automobile parking. The project would improve the access and provide automobile parking areas. It would also provide a standby electrical plant, runway lighting, drainage syst:emimprovement and a CFR building (Map IBRD 13572). - 24 -

4.17 Future Development - The location of Crespo Airport relative to the city of Cartagena and its development is not suitable for the long range developrent of aviation in the area. The airport hinders further development of the residential areas and restricts access to the villages along the beach to the northeast. Terrain near the airport penetrates the standard flight clearance air space, and flight paths cross over heavy industrial and residen- tial areas at low levels. Ground access to the airport is constrained because of its location at the end of a narrow peninsula. Further expansion of the runway or even construction of a parallel taxiway would be very expensive because it would require filling ocean and lagoon areas. A 1972 study by Dutch consultants identified potential sites for a new airport.

4.18 While the construction proposed at this time is needed now, it should be considered as an interim solution only and no further construction should be considered at this site. The economic studies have shown that, while the proposed construction is economically justified within the 10-year life projected, the construction of an entirely new airport is not justified at this time, but would be in the early 1990s.

4.19 Since future development of Cartagena and nearby tourism facilities would require expansion of portions of the airport in about ten years to serve their needs and since the Crespo Airport is not technically suitable for further expansion, agreement was reached during negotiations that no additional works other than the proposed project and other investments in the approved plan would be carried out at Crespo and that, in consultation with the Bank, DAAC would prepare an aviation master plan for the Cartagena area through the year 2000 and present it to the Bank for review by June 30, 1980.

(iii) Bogota - Eldorado International Airport

4.20 Background and Preparation - Eldorado is the most important airport in Colombia in terms of passenger, cargo and aircraft movements. It is also a very important domestic terminal as indicated by the fact that 78% of its traffic is domestic. The taxiways and aprons are under-strength for the type of aircraft now using the airport. This causes aircraft operational delays when these areas are closed for repairs. The passenger terminal building and its aprons are now operated at full capacity during peak periods of traffic. Much of the air cargo handled at this airport is either received from or bound to international points. Its quantity has overwhelmed the capacity of the cargo facilities. Huge amounts of cargo now stand on the open apron awaiting clearances or shipment and sustain weather damage as a result.

4.21 To rectify these problems, DAAC has adopted a system of pavement strengthening consisting of grouting the base materials with Portland cement and sand and overlaying the pavement with hot mix asphaltic concrete. The architects within DAAC have also designed improvements to the terminal and cargo building with the assistance of IATA. These designs are expected to be ready for advertising by October 1978.

4.22 Proposed Development (Map IBRD 13573) - The project would consist of strengthening the taxiways and passenger terminal aprons, relocating the access road to the Colombian Air Force facility so that the passenger terminal aprons may be enlarged, enlarging the cargo facility, and improving drainage of the aircraft operating areas. The duty-free shops in the international finger would be relocated to a new area to be constructed above the existing employees' cafeteria. The released area would be enlarged to provide nine - 25 -

internationalholding rooms and gate positions (ten more aircraft positions would be available on the expanded internationalapron). The existing arriving baggage and customs area would be enlarged to accommodate50% more traffic. The domestic finger would be enlarged to provide eight waiting rooms and gate positions (eight more aircraft positionswould be availableon the expanded domestic apron). The arriving domestic baggage area would also be enlarged by 50%. In addition to the physical improvementof the existing facilities,new air navigationalfacilities would be installed for approaches to Runway 30 (paras 4.27 and 4.30). These improvementswould provide adequate capacity for the projected passenger and aircraft traffic until the early 1990s.

(iv) Bogota - Second Runway

4.23 Background and Preparation- While the 75,000 annual aircraft movements now occurringat Eldorado could be handled relativelyeasily by a single runway under normal circumstances,conditions at Bogota are complicated by the elevation of the airport (2,546 m), the high surroundingterrain (2,800 to 3,300 m) and poor visibility generallyduring early morning hours, which combine to cause aircraft delays both on the ground and in the air. There are air navigationalaids and an instrumentprocedure for approachesto and landings on Runway 12, but landings on Runway 30 (the same runway with approach from the opposite direction)must use the approach aids for Runway 12 to descend from altitude through clouds, which flight path would also be utilized by aircraft taking off from Runway 30 in the opposite direction. Thus, the capacity of Runway 30 is limited by this conflict and the time necessary to clear each aircraft either arriving or departing,which, in effect, limits the annual capacity of the airport.

4.24 DAAC has had several studies made over the years to find a solution to this problem. The last, a study of airport capacity,was initiatedat the suggestion of the Bank.

4.25 Air Traffic Delays - The latest capacity study determinedthe amount of aircraft time lost because of the opposite directionsnecessary on the approach/departurepaths of Runway 30. In addition, the capacity of the airport under existingconditions was determined.

4.26 Second Runway Solution - The long-termsolution to the problem, undoubtedly,is to constructa second runway along with its associatednavaids. The second runway in itself is only part of the overall problem; the ultimate capacity of the airport must also be considered. This necessitatesincluding the study of a third runway and its location within the second runway site selectionstudy. Various proposalshave now been narrowed down to the three shown on Map IBRD 13574.

4.27 Adlitional Air Navigational Aids - Interim Solution - While it is acknowledged that a second runway would ultimately be required to increase the capacity of the airport, an interim solution which would solve the problem of approaches to Runway 30 would delay the need for such constructionuntil after 1993. The aiLrportcapacity study (para 4.24) proposed the installationof new navaids which would provide an approach path parallel to that for Runway 12 and guidance to Runway 30. This solution,while partially acceptable,would require aircraft to descend toward high terrainbefore turning toward the ru-nway. Since this is not a fail-safeprocedure, a counter proposal was made - 26 - during appraisal to install a navaid to the northeast of the airport. By locating it in this position, a descent path parallel to the high terrain could be established. This alternative procedure is still being studied by DAAC, but has been delayed because the flight test aircraft is grounded for maintenance. The acceptability of such a solution will be verified as soon as the aircraft is able to fly again. In the meantime, no further site selec- tion can be done. Although this facility would be useful now, its immediate need is still a year or more away.

4.28 Proposed Master Plan - Zoning restrictions now applied over a wide area surrounding the Eldorado International Airport pending resolution of the location and orientation of a second runway must be reviewed. Although, in light of the airport capacity study, the second runway would probably not be justified before the early 1990s, a review by consultants of the existing master plan and other planning studies would permit a selection to be made among the three proposals and appropriate acquisition and zoning policies to be adopted.

4.29 To settle the question of the future development for the Bogota airport, the project would provide funds for consultants' services to review and update the existing master plan for the airport.

4.30 Proposed Development - The project would provide the navaids deter- mined to be necessary for an acceptable independenitapproach to Runway 30. This would involve direct4onal as well as position-locating equipment.

(v) Bogota - Customs Facilitation

4.31 Background and Preparation - Although additional air cargo terminal and warehouse space as well as apron area is needed, at the same time institu- tional improvements in customs procedures would reduce part of the problem and are urgently required. Under financing provided by UNDP (US$70,000), a study of customs procedures is being made by FALPRO, a unit of UNCTAD in Geneva. This study constitutes about one man-year's work. It would first identify the problem areas and make recommendations for their elimination and then provide the technical assistance necessary to implement the recommendations.

4.32 Terms of reference have been prepared by FALPRO and reviewed by the Government. The Government has requested UNDP to initiate the study. UNDP is now in the process of selecting consultants.

4.33 Proposed Development - It was agreed during negotiations that the Government would carry out this study and implement the recommendations of the study agreed between the Government and the Bank before June 30, 1979.

(vi) Flight Facility Inspection (FFI) Aircraft

4.34 Background and Preparation - Periodic inspection of the various aids to air navigation is recognized internationally as a vital requirement for the safe operation of aircraft. This involves precision flying near each radio navigational aid and measurement of the signal received by the FFI aircraft. - 27 -

If the signal is not within prescribed limits, ground adjustmentsmust be made and the navaid.tested again. In addition to the radio aids, approach and air field lighting,runway marking or painting and radar accuracy must be inspected.

4.35 At the present time, DAAC owns and operates a Douglas DC-3 FFI aircraft. Because of the size of Colombia and the relatively slow speed of the DC-3, it is unable to perform all of the flight inspectionsnecessary to keep the increasingnumber of navigationalaid facilities properly calibrated in accordancewith the accepted standards.

4.36 Cost:estimates for budgetary purposes have been received from several aircralftand electronicequipment manufacturers. Operational speci- ficationshave been prepared as well as a method for procurementevaluation.

4.37 Prop)osedProcurement - The project would include the purchase of a suitable aircraft for FFI equipped with a flight inspection console. There would be a second console to replace the aging unit in the existing DC-3. Ground equipment for the calibrationof these units and for the ground tech- nicians during flight inspectionswould be provided. Conversion training for the flight and electronic technicianson this aircraft, as well as new equip- ment, would aLso be provided.

(vii) TeclnicalAssistance and Training

4.38 Tec]hnicalAssistance - DAAC's electronicengineering and maintenance staff need upgrading training in order to service adequately the additional navigationalaids and communicationsequipment now being installed. Air Traffic Control proceduresneed updating to handle the increasingnumbers of jet air- craft and the increasedtraffic. Together with the airport expansion included in the project, additionalairport engineeringassistance is required. Enlarge- ment of the terminal buildingswould require trained staff and management. Increased size of facilitieswould necessitatenew concession contractsand air- port user charges. Technicalassistance for these purposes would be necessary.

4.39 The project would include 13 man-years of technical assistancefor DAAC. The areas to be covered would be: air traffic control (1 year), electronicengineering or maintenance (2 years), spares procurementand warehousing (2 years), airport and terminal building management and operation (3 years), airport accounting (3 years) and planning (2 years). This assis-, tance very likely would be provided by the InternationalCivil Aviation Organization(ICAO) or other suitable entity. Agreementwas reached during negotiationsthat all advisory personnel assigned to this project would be selected in consultationwith the Bank. Outline job descriptionsare shown in Annex 1.

4.40 Training - Although DAAC has been attempting to maintain a level of competent staff commensuratewith its responsibilitiesthrough the means of its existing training procedures,demands of a rapidly changing industryand increasingnumbers of infrastructuralunits have combined to throw DAAC far behind its requirements. A detailed study of training requirementsdone by ICAO in 1975 (Annex 2) for DAAC indicateda need for about 950 new personnel in various categoriesover the next five years. All of these would require some type of training as well as upgrade training for about 325 of the residual personnel. Since that time, DAAC has been training some of the personnel but - 28 -

requires financial assistance to train them as fast they are needed. To assist D)AAC,the project would include funds for about 100 man-years of train- ing, which would reach approximately400 of the remaining untrained technical and professionalstaff through two-, four- and six-month training courses at appropriate schools. DAAC would be able to cover the rest. During negotia- tions, agreement was reached that a training plan would be prepared by DAAC, with suitable assistanceand in consultationwith the Bank, by January 1, 1979. It would be a condition of disbursementon the training and technical assis- tance components of the loan that contracts agreeable to the Bank, between a suitable entity and DAAC, covering such training and technical assistance, would have been entered into by that entity and DAAC.

(viii) Financial Consultants

4.41 Background- In order to strengthen its accounting capability,DAAC is preparing to undertake a study of its accountingsystem and, at the same time, to determine if the volume of activity warrants computerization (para 3.11). Consultants funded through an approved loan from FONADE would carry out the study. In addition,DAAC's user charges, rental charges, concessionaries'contracts and revaluationof assets need to be updated (paras 6.12 and 6.21).

4.42 Proposed Assistance - The project would include consultants'services to review DAAC's user charges, rental charges and contracts, to recommend revisions, to assist DAAC in implementingthe reconimendationsand improving its cost accounting system and to assist FAN in revaluing its assets. During negotiations,it was agreed that the consultants'final report would be completed by January 1, 1980 and that DAAC would implement those recommenda- tions agreed upon in consultationwith the Bank.

E. Execution

4.43 The Governmentwould be the borrower but FAN would carry the foreign exchange risk. The proceeds of the loan would be transferredto FAN through a SubsidiaryAgreement satisfactoryto the Bank, execution of which would be a condition of loan effectiveness. The project would be executed by DAAC with the assistanceof consultants (para 4.49). The first civil works contracts are expected to be awarded by the end of 1978. The constructionis expected to take about one-and-one-halfyears at Cartagerna,three years at Bogota and four years at Medellin. About 150 men would be employed at Cartagena, 500 at Bogota and 1,500 at Medellin. Cartagena is expected to be completed in June 1980, Bogota in December 1981 and Medellin in December 1982.

4.44 Navaids and communicationequipment would be purchased and installed by DAAC in Cartagena and Bogota and by the lighting contractor in Medellin.

4.45 DAAC would administer the 13 man-year technical assistance portion of the loan and also the 100 man-year training component. DMAC would also administer the contracts of the constructionsupervision and financial consultants.

4.46 It is expected that the contract for the FFI aircraft and the FFI equipment and training would be awarded by March 19a79 and that the aircraft and equipment would be delivered by June 1980. - 29 -

4.47 During negotiations,the project implementationschedule (Chart 18893) was agreed.

F. Procurement

4.48 Contracts for civil works (earthworks,paving, drainage, water and electricalsupply and distribution,sewerage, buildings, etc.) and visual aids, navaid and communicationequipment and installationwould be awarded after internationalcompetitive bidding by prequalifiedcontractors. Each of these is expected to be separate contracts at Medellin. All work at Cartagena is expected to be issued as one contract and, at Bogota, as two (pavingand buildings). Foreign contractorsare expected to compete at Medellin and local at Cartagena and Bogota. The contract for the FFI aircraft and associated equipment would also be awarded after internationalcompetitive bidding. Since aircraft are not produced locally, no local suppliers are expected to bid on this Ltem. On all other equipment contracts, local bidders would be granted a margin of preference of 15% of the CIF value of foreign bids or the applicable customs duties, whichever is lower.

4.49 An agreement for 13 man-years at an estimatedUS$5,000 per man-month would be executed by DAAC for the provision of the technicalassistance per- sonnel through ICAO/UNDP or other suitable entities. Training would also be arranged through ICAO/UNDP or other suitable entities at rates not exceeding approximatelyUS$4,000 per year per candidate. The master planning contract would involve about 75 man-months at US$8,000 per month, the financial consultant contract about 50 man-months at US$7,500 per month, the FALPRO contract about 12 man-months at US$6,000 per month and the constructionsuper- vision contracts about 625 man-months at US$7,000 per month.

G. Financing and Disbursement

4.50 Apart from the UNDP-financedcustoms facilitationstudy (para 4.31), the proposed.Bank loan would furnish the funds to cover the foreign exchange component (para 6.15). FAN would furnish the remainder from internally generated funds.

4.51 Disbursementof funds from the loan would be on the followingbasis:

(a) 100% of foreign expendituresfor equipment and its installation;

(b) 100% of foreign expendituresfor technical assistanceand training;

(c) 100% of foreign expendituresfor foreign consultant services and 50% of total expendituresfor local consultants;and

(d) 59% of total expenditures for civil works.

A schedule showing the estimated rate of disbursement is given in Table 4.2. Disbursement is expected to run through June 1984. The closing date should be December 31, 1984.

H. Ecology

4.52 The ecological and environmentaleffects of the developmentof the project airports were taken into account during the siting and preliminary design studies for the new Rionegro Airport at Medellin and the expansion of - 30 -

Crespo Airport at Cartagena and would be a major factor to be considered during the evaluation of the second runway site for Eldorado and the revised Master Plan.

4.53 Closing the existing airport at Medellin would eliminate the aircraft noise problem there. The release of the existing airport land at Medellin would place much needed land back in the hands of the city for urban develop- ment. This land could support 8,000 to 10,000 families if used for residential purposes. The new airport would take 580 hectares out of agriculturalpro- duction and would displace about 100 families. The new site does not contain any historical sites or other areas needing preservation,and no wildlife of significancewould be affected.

4.54 The expansion of the Crespo terminal building would require acquisi- tion of about 30 low value houses. The expansion of the runway would take place on unproductiveland already impacted by low flying aircraft.

4.55 The proposed developmentat Eldorado would occur on airport land and would not affect the environmentexcept for a possible increase of activity as time goes on.

V. ECONOMIC EVALUATION

5.01 The project would result in significantsavings in costs for Colombian domestic and internationalair transport through more efficient use of aircraft and improvementsin the reliability of services. The improvementswould provide facilities to cope with the increasing volume of air traffic and remove significantrestrictions now imposed at Medellin and Bogota in order to maintain acceptablesafety standards. Both the costs and designs for the facilities proposed were reviewed during appraisal to assure that the minimum cost solutions would be adopted. Benefits and costs for each major project component are discussed in the following section.

A. Medellin

5.02 At Medellin, the need for a new airport, and the principal justifi- cation for the project, stems from the inability of the present airport to cope with traffic demand in the foreseeable future and the dependenceof the city on air services for business and personal contacts with other cities in Colombia. It is estimated that, from around 1983, airspace limitationwould impose increasingtraffic congestion,and, even with allowancesfor improved aircraft handling techniques,limits to the volume of traffic that could be accommodatedwould be reached by about 1988. The new site at Rionegro provides a viable solution for maintainingaccessibility to Medellin and, at the same time, provides opportunitiesfor improved services by removing operating restrictions.

5.03 One of the aviation-orientedindustries particularly favored by the new airport is the small but rapidly growing flower farming centered at Rionegro itself. Just as export flower growing has spread from the Bogota savannah to neighboringCundinamarca, so these activitieshave sprung up - 31 - around other internationalairports at Cali and Medellin. At Medellin, the new site would remove restrictionsimposed by the closure of the airport at sunset on the time availablefor harvesting, and the avoidance of flight cancellationsin poor visibilitywould tend to improve average prices received for the flowers by assuring prompt delivery.

5.04 Closure of the present airport also has important economic -nefits for the city of Medellin through the potential urban uses of the land. Urban population growth, at 4.2% p.a., is among the highest in Colombia,while land within the Valle de Aburra suitable for urban uses is becoming increasingly scarce and expensive to develop. It is estimated that the airport site could accommodateone to two years growth for the city, allowing suitable areas for commercial,residential and recreation uses, with significantsavings in the costs of utilities and services,and in urban transport for residentsand workers.

5.05 Calculationof the rate of return for the new airport takes into account the net savings in aircraft and passenger time costs through the avoid- ance of delays and congestion,an estimate of the benefits for the additional passenger capacity of the new airport, the net effect on freight shippers from the under-avaLilabilityof freight services, and savings in urban development costs through the redevelopmentof the existing airport. Costs include con- struction of the new airport, its access link and maintenanceand operating costs for the new site. Capital costs otherwisenecessary at the present airport have been deducted.

5.06 Vehicle costs, obtained from the airlines and estimatedby the consultants,were adjusted for the taxes and duties on imported equipment and spare parts, and to reflect the landed rather than market price of petroleum. For ground public transportvehicles, 67% of salary costs were used to reflect the shadow price of unskilled labor. The overall estimateswere then adjusted to reflect the expected relative price changes between local and foreign elements of operatingcosts. Table 5.1 shows average cost by vehicle type used in the evaluations.

5.07 Domestic time values are based on passenger survey data for 1972 and 1977, showing journey purpose and household income for air passengers. Air passenger income levels from the 1972 survey were updated to 1977 on the basis of general trends in income levels. These estimatesare shown in Table 5.2., No time values are applied in cost or benefit streams for international travelers.

(i) BetnefitsInvolving Time Savings

(a) Weather Delays

5.08 Delays due to early morning cloud and other weather conditionsat Olaya Herrera were compared with estimates for Rionegro based on a comparison of airline schedulesand meteorologicaldata for the new site for 1976 and 1977. From the resultingestimate of net additionaldelays per aircraft, passenger delays were estimatedby applying average passengersper aircraft for each type, and allowing for the double delay to departingpassengers for both the late arrival of the aircraft and the departuredelay itself. Thus - 32 - the average delay saving of around 650 aircraft hours for 1976/77 is equiv- alent to around 85,300 passengerhours. Costs were estimatedusing the time and vehicle cost values given above and were projected,making allowance for the change in aircraft mix. Benefits from savings in weather delays are held constant after 1988 when it is estimated that physical saturationof the existing airport would occur.

(b) Flight Cancellations

5.09 Flight cancellationsat Olaya Herrera affect mainly afternoon flights when meteorologicalconditions force early closure of the airport. Since night flights are not permitted,passengers are delayed overnight, either in Medellin or elsewhere. At Rionegro, on the other hand, the airport would be fully equipped for instrumentand night flying, and such cancellations would be very rare. Since it seems reasonableto presume that passengers at this time of day would be completing rather than starting journeys, the passenger cost has been estimatedat 12 hours at the leisure rates. The number of passengers affected for 1977 is projected,making allowancefor the changing aircraft mix up to 1988, and thereafterheld constant. No allowance is made for accommodationsor other costs. Aircraft costs for the domestic fleet have been estimatedat two hours, being the average differencebetween the sunset and the normal cessation of service.

(c) CapacityDelays

5.10 In 1983, it is projected that traffic at Medellin would reach the practical capacity of Olaya Herrera, estimated from air traffic control records and other data at 30 movements per hour or 65,000 movements per year. This is well below the 48-55 movement rate that would be expected with two-way instrument runway operations,and, hence, the move to Rionegro would avoid significantdelays during good weather periods due to traffic congestion. Forecasts of congestiondelays at Olaya Herrera and Rionegro are based on standard techniquesdeveloped by the US Federal Aviation Administration1/, and the differenceis converted to passenger time savings using average passengers per aircraft for the different type groups. Because the limitation at Olaya Herrera is one of airspace rather than ground facilities,airspace saturationwould be reached fairly quickly, so that not even by increasing delays would the amount of air traffic be increased. It has been estimated that this physical limit would be approximately20% above the practical capacity or 78,000 movements per year and would be reached in 1988.

(d) Shorter Flight Time

5.11 The new site of Rionegro is located close to the flight paths for the existing airport and in the locality of the VOR beacon at Santa Helena. All aircraft using instrumentnavigation and all those flying visual flight rules except on north-southroutes pass over this aid enroute to Olaya Herrera (approximately90% of all flights). Shorter flight distancesand times are thereforeinvolved at Rionegro for air traffic to and from Medellin -- averagingbetween 5 and 12 minutes per movement, dependingon the aircraft. Cost savings were estimated taking into account the changing aircraft mix in the forecast years.

1/ Techniques for DeterminingAirport Airside Capacity and Delay, Report No. FAA-RD-74-124,June, 1976. - 33 -

(e) Ground Access

5.12 Access to Rionegro involves, on average, an additional 27-km surface journey. Costs involved were calculatedassuming a 50% split for domestic business travelersbetween private automobiles and taxis, with all other domestic passengers traveling by bus. Internationalpassengers were split 50-50 between cars and buses. The calculation of vehicle costs takes account of the effects of different types of terrain and the projected domestic passenger time costs, considering the average speed achievable under different road conditions. The vehicle flow projection of 50 vehicles per hour in 1983 increases to 113 vehicles per hour in 2000 - both well within the estimated capacity of the existing main highway; therefore, no allowance has been made for upgrading or expansion of this highway in the future. An allowance of Col$ 3 million per year has been included in the economic cost stream to reflect additionalmaintenance requirements.

(f) Overall Time Savings

5.13 Overall, the time savings result in net discountedvehicle cost savings of :ol$ 6,569 million and estimated additional passenger time costs of Col$ 915 million (Table 5.3).

(ii) O)therBenefits

5.14 Other benefits included in the analysis are discussed in para- graphs 5.15 through 5.19.

(a) Oversaturation

5.15 After 1988, the amount of traffic that could not be handled at Olaya Herrera quickly becomes very significant. By 1995, it represents over one-quarterof the domestic aircraft movements. Because this represents a much more than marginal change in travel patterns, it is reasonable to presume that some passengerswould undertake journeys on the next best alternative. As a proxy for the economic benefits of the additional traffic handling capacity at Rionegro, calculationshave been made of the additional user costs involved in transportingthe "denied" passengers by surface modes. The calculationsare based on a unique demand curve for travel, covering all trip purposes and modes.

5.16 Estimation of the volume of traffic using alternativetransport after 1988 is made under the assumptions that diverted traffic has the same general characteristicsas the peak hour flow and that all international flights are:completed. Both assumptions lead to a lower overall estimate of alternative transport costs. For each origin and destinationand for each journey purpose, costs per passenger for bus and taxi modes were calculated and the lower compared with the correspondingair journey cost, calculated on a city center to center basis. In neither case was the effect on infrastruc- ture costs included. The resultingbenefit stream, reflecting the lower economic net costs in air transport for passengers, rises from Col$ 73 million in 1990 to Col$ 1,329 million in 2000. - 34 -

(b) Urban Uses of the Existing Site

5.17 Benefits from the use of the existing airport site were calculated by comparing alternative proposals for its urban use with costs of providing an equivalent development in typical fringe areas around Medellin. The alternatives for the Olaya Herrera site are consistent with the parameters used in the redevelopment of the airport site at Bucaramanga, based c the concept of an integrated medium/high density development, while fringe devel- opment around Medellin is much more dispersed, usually with no provision for employment or industrial areas. Development of the site is estimated to result in savings in the costs of providing roads and basic services of between Col$ 360 and Col$ 570 million, approximately Col$ 170 million per year in urban transport costs of residents of the new area, and Col$ 12-23 million in general congestion of major access links in the city. It is estimated that the redevelopment could be accomplished within five years after the closure of the airport.

(c) Air Freight

5.18 Air exports and imports at Medellin have been growing at an average rate well over 30% p.a. for the last ten years, which is considerably above passenger growth. A significant portion of this freight travels via domestic services to other gateway airports and is expected to continue to do so throughout the forecast period. At Rionegro, this traffic could be easily accommodated, given the very high load factor (70%) of belly-hold cargo space in Colombia. At Olaya Herrera, however, the capacity limit would lead to a reduction in the volumes that could be carried, beginning at around 2,000 tons each for imports and exports in 1990 and rising rapidly thereafter. For imports, the costs so imposed have been estimated as an additional day's stockholdings on the assumption that, in such circumstances, some form of express land transport would be available to make connections at other inter- national airports. The stockholding cost is estimated at 12% of the average capital cost for one day's imports susceptible to air freight. Since most of the air exports are expected to be perishables (flowers, vegetables), costs have been estimated at the value of lost production to Colombia. For non- perishable air exports (e.g., fashion goods), additional transport costs exceed value added, and it is assumed that these would also be suppressed. The benefit stream for Rionegro increases from about Col$ 13 million in 1990 to about Col$ 100 million by the turn of the century.

5.19 Overall, the majority of the net benefits for the new airport at Rionegro accrue to domestic airlines and passengers, with most of the rest going to residents of the area. Discounted at 12%, the net benefits to air- lines and passengers are Col$ 5,300 million and for the general public are Col$ 1,400 million, not including benefits from reduced noise and pollution in the city. Table 5.3 illustrates the composition of the benefit flows. The rate of return on the new airport is 24%, reducing to 14% for the low traffic forecast. Excluding time values, the project shows a 27% return, since overall time savings are negative. Table 5.4 shows details. - 35 -

B. Bogota

5.20 Bogota is the principal focus of air traffic in Colombia,and con- ditions there affect the efficiency and reliabilityof services throughout the network. Expansion of the loading areas, aircraft parking and improvements in passenger traffic flow and baggage claim would shorten the time required for aircraft loading and unloading and, hence, improve fleet utilization. The mainline domestic fleet aircraft in Colombia are in service for 13-14 hours per day, includingabout 7-1/2 flying hours. For aircraft based at Bogota and flying an average of six hub and spoke flights per day, the savings in turn- around time would accumulate to the equivalent of an additionalflight per day. Provision of additionalpositions at the internationalfinger (which also copes with domestic overflow)would avoid aircraft delays while waiting to unload, arising from both the increasingtraffic and the greater use of large-capacityaircraft. Strengtheningthe taxiway at Bogota would also avoid the impositionof weight/rangelimitations on these larger aircraft which would otherwise negate the economieswhich they offer.

5.21 Benefits are calculatedon the savings to the domestic fleet through faster turnaroundof aircraft,reduced delays to Colombian aircraft in inter- national operations and the avoidance of the weight penalties on Colombian wide-bodied,aircraft. The terminal expansion is expected to provide adequate capacity until the early 1990s while the normal life for the taxiway strengthen- ing is seve!nyears. Unquantifiedbenefits include unobstructedpassenger flows, particularlyfor arrivals, greater efficiencyand security in baggage claims and improved facilitiesfor handling freight carried on passenger aircraft.

5.22 Ihe rate of return on the improvementsis 20%, reducing to 16% for the low traffic forecast.

C. Cartagena

5.23 At Cartagena,the airport works are part of a general expansion of tourism facilities. In the past three years, bed capacity has trebled, and when the 600-bed Cartagena Hilton opens in 1979, there will 8,600 beds avail- able, including apartment and guest house accommodations. Improvements are being made to water supply and sewerage systems, and the city has embarked on a scheme to redevelop the old market site and nearby waterfront as a convention center and yacht marina.

5.24 Although foreign tourism is very visible in the city, domestic tourism represents the majority of visitors and facilities. Less than a quarter of the accommodations in the city are of the standard typically used by foreign tourists. The average length of stay for non-charter traffic is three nights. Because of the preponderance of domestic tourists in the overall traffic, improvements in the terminal area would provide benefits mostly to them.

5.25 The majority of foreign tourists arrive from North America by charter flight, arranged by three large tour operators. Avianca has recently opened a sales office in Vancouver, and Colombia is negotiating scheduled traffic rights to eastern Canada. The main tourist season is between November and March, with a minor domestic peak during July and August. - 36 -

5.26 Lengthening and strengthening the runway at Cartagena would allow aircraft to fly non-stop to Canada and the midwest of the United States, significantly reducing the costs of flights and improving Cartagena's relative attractiveness while opening new potential markets. The apron expansion, access roads and carparks are complementary to the new terminal buildings being constructed. Together, the new facilities would be sufficient for normal traffic requirements until the early 1990s.

5.27 The promotion of Cartagena as a tourist destination began in 1974 when Colombian rules governing charter operations were relaxed, and it has coincided with a general slackening in Caribbean tourism. However, with the apparent revival at many well established destinations during the 1978 season, it is not certain that Cartagena could retain its present market position, taking into account the relatively higher costs for tour operators and the wide range of alternative destinations. Nevertheless, Cartagena has an interest in the tour visitors, anticipating the prospects for developing a wider range of regular air connections for the city and its industries.

5.28 Since the airport improvements are part of a wider tourism infra- structure program, it is difficult to separate precisely the benefits attri- butable to them. The approach has therefore been taken of including, for international traffic, only payments made by tour operators and passengers for the use of airport facilities and gross margins on spending related to exist- ing hotel capacity. For domestic traffic, benefits include savings in apron delays and unquantified savings in road and carpark congestion. The return on the project is 14%, rising to 17% for the low traffic forecast because of the increased useful life of the facilities to be provided and the greater influence of the rapidly rising benefits to domestic traffic.

D. FFI Aircraft

5.29 Between 1972 and 1979, when the current installation program is completed, the number of enroute and terminal area navigation aids in service in Colombia will have doubled. These aids will provide safe and reliable navigation on the major domestic routes of the country and, for the first time, in the Llanos and Amazonas areas. The task of inspecting, calibrating and, when necessary, recalibrating these aids is now beyond the capabilities of the existing DC3 FFI aircraft. First, the number of test hours required has more than doubled from 1,320 hours in 1972 to 2,760 hours in 1979 plus about 150 additional ferry hours; and, second, the older equipment now installed in the DC3 requires recalibration between test flights in the higher, cooler areas and those on the coast. Additionally, the aircraft does not have the speed or altitude capabilities necessary to provide reliable enroute checks for jet aircraft aids.

5.30 The proposal to purchase a second aircraft to perform flight checks on main route navigation equipment and to re-fit the existing aircraft for permanent duty in coastal and other low altitude areas was tested against the alternative of hiring a suitable test aircraft from a neighboring civil aviation administration, at the going rate of US$700 per hour. Based on the proposed flight plan for the two aircraft (Table 5.5), the options would be: - 37 -

Annual Cost US$ (million)

(a) hire aircraft for all checking and testing 2

(b) use the DC3 in coastal areas (1,010 hrs) and hire aircraft for main routes (1,750 hrs) 1.5

(c) hire aircraft for coastal areas (1,010 hrs) and purchase a new aircraft for major routes (1,750hrs) 1.2

(d) uEe the DC3 for coastal areas (1,010 hrs) and purchase a new aircraft for major routes (1,750hrs), as proposed 0.7

5.31 Option (a) is the highest cost solution and is rejected; option (c) has a lower cost than (b) but does not avoid the purchase of a new aircraft. The benefits of the proposal, option (d), are therefore taken as the cost savings of approximately US$775,000 per year by comparison with option (b). At an estimated capital cost of US$4.5 million, including the necessary training, the rate of return is 15%, independent of traffic fore- casts.

E. Overall Proiect Returns and Benefit Distribution

5.32 The economic return is estimated at 24% for Medellin, 20% for Bogota, 14% for Cartagena and 15% for the flight inspection aircraft. Overall, the project has a return of 22%, reducing to 13% for the low traffic forecasts. Benefits considered accrue initially to Colombian airlines and passengers, mainly on business journeys (Table 5.3). The efficienciesfor the airlines, and resulting lowering in future real travel costs, would assist in easing constraintson long distance passenger travel and in facilitatingthe expan- sion of business activity depending on air freight. The direct savings for airlines arLdusers over the period are the equivalent of a reduction of 5-6% in realldomestic fares and freight rates over the first ten years of the project. Although it is difficult to determine preciselywhich activities would be most favorably affected by the project, the principal users of both passenger and freight services are the manufacturingsector and perishable export producers, while agriculturalprocessing industries and the commercial sector are proportionately important users. Apart from the tourism and re- lated industries in all three cities, the principal non-user benefits from the projeci:accrue to the residents of Medellin, both through the more efficient use of land within the Valle de Aburra and through the provision of an employment pole at Rionegro. Studies are to be made to determine the most appropriatemeans of achieving these last benefits.

F. Project Risks

5.33 Two types of risk affect the project. First, the need to seek financing for some project items arose in part from poor planning coordination - 38 - within DAAC and the implementationof a large equipment purchase and instal- lation program in 1974 which exhausted funds originallyallocated to ongoing civil works. Since then, subsequent administrationsin DAAC have taken a variety of corrective measures (paras 3.07 to 3.11), and the DAAC Planning Department now plays a central role in setting prioritiesand the preparation of forward investmentplans (para 2.13). Additionally, the preparation of a comprehensivefinancing plan covering DAAC's entire investment program (Chapter VI), coupled with improved planning and carefully prepared implemen- tation arrangements(Chapter IV), would tend to ensure that the risk of poor performance is minimal.

5.34 The second type of risk, related to possible variations in traffic levels and project costs, would affect the econo'micreturn. As noted above, the project has an acceptablereturn (13%) under the low traffic forecast, which averages 4% for domestic traffic and 8% for internationaltraffic. In other sensitivity tests, project costs were increased by 20%, leading to returns of 16%, 20%, and 10% for Bogota, Medellin and Cartagena respectively,with an overall return of 19% (Table 5.3).

5.35 Since the viability of the project for a new airport for Medellin is not solely tied to potential savings in aircraft operating costs but is crucially linked to the willingness of all passengers to triavelan additional 40-50 minutes to a more distant site in order to avoid delays to some passen- gers because of operating restrictionat Olaya Herrera, domestic passenger time has been included in the central rate of return estimate. Overall, net time savings for passengersare negative, and, if excluded entirely, the return on the Medellin project would be 27%. If Olaya Herrera Airport were not closed but remained open for light aircraft traffic, the rate of return would drop to 16%.

VI. FINANCIALANALYSIS

A. Existing Situation

6.01 For the period 1970 to 1977, DAAC/FAN has been able to maintain its working expenses at a reasonable level considering the increases in volume of traffic and prices. For this period, the average annual increase was 36%. These increases in working expenses were more than offset by DAAC/FAN-generatedoperating revenues,which also experienced annual average increases of 36%. These increases in revenue were caused by substantial traffic growth supplementedby tariff increases beginning January 1, 1976.

6.02 In every year, revenues generated by DAAC/FAN were sufficient to cover working expenses and debt service and make a contributionto investment except in 1976. During this period, DAAC/FAN made significantimprovements in covering its total cash requirementsfrom FAN-generatedrevenues for each year. The contributionstoward total cash requirementsincreased from 47% to 70% through the years 1970 to 1977. The Government made budget transfers as necessary which covered approximately90% of DAAC/FAN investmentsin this period and 40% of debt service in 1976. However, as the financialperformance of DAAC/FAN improved, the percent of total cash requirementsreceived from the Government was reduced substantiallyfrom 67% to 17% through the years 1970 to 1977. The amounts of Government inputs equivalent to equity and their percent- ages of working expenses, investment and debt service covered are as follows: - 39 -

% of Total Cash Requirements Government Inputs for Operations,Investment and Year Equivalent to Equity Debt Service (Col$ millions) (Currentprices)

1970 125.8 67.5 1971 115.0 44.6 1972 135.9 46.8 1973 84.6 23.7 1974 189.4 24.5 1975 56.7 5.9 1976 206.7 26.9 1977 185.1 16.9

The Government inputs are shown in Tables 6.1 and 6.2.

6.03 Ia 1974 and 1975, a relatively large investment program was undertaken in civil works, navigationalaids and communicationsequipment. This investment,which should have been phased in over a period of several years, unfortunatelyincurred external debts for DAAC/FAN for the navigational aids and communicationsequipment for 1974 and 1975, amounting to Col$ 202.8 and Col$ 414.6 million respectively. In 1976, when the first large debt service payments were due, DAAC/FAN did not have sufficient funds available to meet this obligation,and great difficultieswere encountered trying to install the navigationalaids and communicationsequipment. As a result, the Government made a large input in 1976 to cover the shortfall (Tables 6.1 and 6.2).

6.04 ]n the latter part of 1976, a new Director took charge of DAAC/FAN. Since then, there have been improvements. Approximately90% of the naviga- tional aids and communicationsequipment have been installed. A reasonable five-year civil aviation investmentplan has been prepared for the whole of Colombia, and Law 3 of 1977 has been enacted, which permits a better adminis- trative reLationshipbetween DAAC and FAN, wherein the head of DAAC is also the legal head of FAN. The new head of DAAC gave full support to the financial aspects of FAN and, as a result of much effort, was able to bring the financial statementsup to date.

6.05 Accounting records of the revenue and expenditure items are kept at DAAC/FAN headquarters. The records are maintained so that revenues and expenses are identified for principal airports,but expenses are not allocated by type of service (para 6.12). A reasonable breakdown of revenues and expenses for the project airports for 1976 was obtained. A review of the financial state- ments shows that increasing delays have occurred in the collection of revenues. If this condition continues,DAAC/FAN would encounter difficultiesin meeting its cash requirements(para 6.13).

6.06 Accounts are currently subject to review by a Government comptroller who works with DAAC/FAN. With his assistance,DAAC/FAN has been able to produce current financial statements through 1977. The assets of DAAC/FAN have been revalued, and this is reflected in the balance sheets for 1976 and 1977 (TabLe 6.3). Although the comptrollerperforms some of the functions of an auditor in his review, the financial operationsof an entity the size of DAAC/FAN should be reviewed by an independentexternal auditor (para 6.14). - 40 -

B. Financial Obiectives

6.07 Government policy has been to maintain DAAC/FAN domestic tariffs at a low level in order to encourage aviation development. The domestic passenger tax is 15% of the amount charged to internationalpassengers, and the domestic landing fees are 28% of those charged for internationallandings. The current level of tariffs would not permit DAAC/FAN to cover its maintenance,investment and debt service requirementsfor the planned developmentprogram (1978-1983). DAAC/FAN should develop a rational plan for covering all working expenses, including salaries and miscellaneousexpenses, in order that the Government would no longer need to cover these expenditures,as at present. However, during the period 1978-1982, even with the tariff increasesprovided for (para 6.09), Government inputs equivalent to equity are necessary. The Government proposes to provide these inputs by continuing to help DAAC/FAN meet its salaries and miscellaneousexpenses. The net amounts of these estimated inputs (NationalBudget Allocation, less 10% transfer of revenues from FAN to the Ministry of Finance),which are specificallydesignated for payment of DAAC salaries and miscellaneousexpenses, in accordance with Law 3, and their percentage of working expenses, investmentand debt service, are as follows:

% of Total Cash Requirements for Operations, Investmentand Year Net Government Inputs Debt Service (Col$ in millions) (currentprices)

1978 514 34.1 1979 659 20.9 1980 779 23.8 1981 897 22.9 1982 1,036 23.6 Total 3,885

These percentagesare approximatelythe same as those experiencedby the Government in the period 1970-1977 (para 6.02). While this arrangement is different from those experienced in other countries, it is the only way in which the Government can contribute equity toward the investmentsof FAN under existing law. It is a common practice in the developing countries for Governments to make equity inputs to the aviation authorities. It is important to note that the Government inputs are not required for the project but would permit DAAC/FAN to carry out the non-project investment program.

6.08 The current leakage of FAN revenues should be corrected in such a manner that DAAC/FAN would receive compensationfor services rendered to passengers (para 3.09). It was agreed during negotiationsthat DAAC/FAN would make the necessary arrangementsto collect all revenues in accordance with the current tariff regulations. - 41 -

6.09 WhiLe it would be desirable for DAAC/FAN to cover all of its oper- ations, maintenance,investment and debt service requirementsduring the period (1978-1982),this is not possible with the proposed level of investments. The Ministry of Finance would need to continue to cover all salaries and miscellaneousexpenses of DAAC/FAN during these years (para 6.07). It was agreed during negotiationsthat tariffs and other charges would be main- tained to keep them constant in real terms at their 1977 year end level for the period 1979 through 1982. It was also agreed during negotiationsthat the Government would make available to DAAC/FAN, annually, sufficient funds to cover its salaries and miscellaneousexpenses for the period 1978-1982. The financial projectionsreflect these agreements.

6.10 Even with these increases,in 1984 and thereafterDAAC/FAN would not be able to cover total working expenses (includingsalaries and miscellaneous expenses),investment and debt service without further tariff increases. Therefore, in.the projections,total revenues have again been adjusted in 1984 to reflect inflation in the year 1983. As a result of these tariff increases, DAAC/FAN would be financiallyself-sufficient and would not require budget transfers from the Ministry of Finance in 1983 or thereafter (Tables 6.4 and 6.5). It was agreed during negotiationsthat such adjustments to tariffs as are necessarywould be applied to produce sufficient revenues to allow DAAC/FAN to cover all working expenses, investment and debt service after 1982 and to achieve a return on annually revalued net fixed assets of no less than 6% in 1980, 7% in 1981 and 8% in 1982 and thereafter. It was also agreed during negotiationsthat the project airports would meet the following individual financial goals: operating ratios would be no greater than 85 at Medellin, 45 at Bogota and 45 at Cartagena by 1983 and gradually decline thereafter (Annex 3). Because of the tariff increases necessary in 1979 through 1984 for DAAC/FAN to meet its operating, investment and debt service requirements,satisfactory rates of return on net fixed assets are possible in the years following the physical completionof the project.

6.11 Since DAAC/FAN may finance new investments through debt, it was agreed durinignegotiations that FAN would not incur any long-term debt unless its net revenues for the fiscal year next preceding such incurrenceor for a later twelve-monthperiod ended prior to such incurrence,whichever amount is greater, shall not be less than 1.5 times the maximum long-termdebt service requirementsfor any succeeding fiscal year on all long-term debt, including long-term debt proposed to be incurred. Debt service coverage indicatorsare shown in Annex 3.

6.12 The accounting system is inadequate and should be redesigned to supply information for each individualairport and by classificationsnecessary to formulate and review user charges. Following these improvements,the structure and level of airport tariffs should be reviewed. The accounting system should also include provision for the proper valuation and disposal of assets. DAAC/FAN realizes these deficienciesand needs assistancefor improve- ment in this area. The assistance for the redesign of the accounting system would be provided by consultants funded through a loan which has been obtained - 42 - from FONADE. In addition, the project would provide funds for a consultant to review and make recommendationson the structure and level of user charges (para 4.42). Agreement on implementationof this study was reached during negotiations. Also, during negotiations, it was agreed that, after implemen- tation of the new accounting system and review of user charges, an improved structure of airport user charges would be set and collected at all airports, where feasible, and that the tariff study would be sent to the Bank for comment by January 1, 1980 with implementationby June 30, 1980.

6.13 At the time of negotiations,it was agreed that receivablesand payables would not be more than 25% (which approximates90 days receipts and payments from the date of billing) of operating revenues and working expenses respectively(para 6.05).

6.14 During negotiations,an agreement was reached with DAAC/FAN that certified copies of the audited annual accounts by independentauditors satisfactoryto the Bank would be furnished to the Bank not later than four months after the end of each calendar year.

C. FinancialPlan

6.15 The total cost of the project is estimated to be US$97.76 million, of which approximately62% would be in the form of a Bank loan to the Govern- ment, the proceeds of which would be transferred to FAN. Except for UNDP financing for the customs facilitationstudy (US$70,000),the balance would be provided by FAN from its revenue generation:

1978-1983 Col$ Million US$ Million

(a) Bank loan 3,893.8 61.00 (b) FAN 2,160.0 36.76

6,053.8 97.76

6.16 Since it is expected that providing these funds would exhaust DAAC/FAN internally generated revenues, it was agreed during negotiations that DAAC/FAN would consult with the Bank on, and not undertake, any invest- ment above US$1.0 million at any one airport until the closing date (except for investmentsin the approved five-year plan), unless it is economically and technicallyjustified, and FAN has obtained financing which will not adversely affect its financial condition, or the carrying out of the project. It was also agreed that FAN would obtain the concurrenceof the Bank before committing itself to any other capital expenditurewhich would be greater than 20% of planned investmentsin the agreed development program in any given year.

D. Financial ProJections

(i) Operating Results

6.17 DAAC/FAN operating revenues by category for 1978 and projected through 1990 are set out in Table 6.4, and the projected operating statements are given in Table 6.5. The financial assumptions on which these are based are listed in Annex 4. Summarized forecast results for 1978, 1980, 1985 and 1990 are as follows: - 43 -

DAAC/FAN 1978 1980 1985 1990 ------Col$ Million------

Revenue 1/ 1,534 2,801 4,375 6,270

Expenses 1/ 861 1,303 2,400 2,729

Working Surplus 673 1,498 1,975 3,541

Depreciation 302 447 960 973

Operating Income 371 1,051 1,015 2,568

Interest 124 261 432 203

Net Surplus 247 790 583 2,365

1/ Assumes that the Government would cover salaries and miscellaneous expenses,which are included, through 1982, which would permit DAAC/FAN to cover its maintenance,investment and debt service requirements. DAAC/FAN would cover these expendituresand discontinue the 10% transfer of revenues to the Ministry of Finance in 1983 and thereafter.

6.18 In every year throughout the projection period except 1978, FAN revenues cover all working expenses, including depreciationor debt service, whichever is greater. The budget allocation by the Government is required for salaries and miscellaneousexpenses from 1978 through 1982 so that FAN may cover its maintenance,investment and debt service. Therefore, the financial objectives could be met in all years of the project (para 6.10).

6.19 The projected operating statements for the project airports are set out in Tables 6.6, 6.7 and 6.8. All of the existing project airports develop sufficient traffic to generate revenues greater than operating expenses beginning in.1978 through the project period and thereafter. The working surplus from these major domestic airports would make a contributiontoward covering the local funds required for investmentsand associated debt service of the project.

(ii) CaLshFlow

6.20 A projected cash flow for DAAC/FAN, based on the assumptions contained in paragraph 6.09, is shown in Table 6.9. Provision has been made for the rep]acementof assets included in the project, when required. A summary of the cash flow for the constructionperiod is set out below: - 44 -

DAAC/FAN 1978 1979 1980 1981 1982 1983 ------Col$ Million------Source of Funds From Operations 673.0 1153.0 1498.0 1918.0 2398.0 1504.0 Loan - World Bank - 289.4 855.4 819.7 1086.9 575.1 7/ Other I/ 131.0 - - - - -

Government Equity 2/ - 450.0 - - - External Loan 3/ - 165.0 168.0 - -- Sale of Land 4/ - - - - - 1025.0

Total 804.0 2057.4 2521.4 2737.7 3484.9 3104.1 Application of Funds Capital Investments 5/ 533.0 1883.0 1646.8 1986.1 2141.0 1068.5 Repayment of Loans - Principal 127.4 180.9 246.2 311.2 337.7 716.9 Interest 124.4 162.0 260.9 322.0 395.8 458.9

Total 784.8 2225.9 2153.9 2619.3 2874.5 2244.3

Cash Surplus 19.2 (168.5) 367.5 118.4 610.4 859.8 Opening Balance 153.3 172.5 4.0 371.5 489.9 1100.3

Closing Balance 172.5 6/ 4.0 371.5 489.9 1100.3 1960.1

1/ Includes 45 million surplus from operations and 86 million received from the Ministry of Finance for investment. 2/ Bilateral agreement with the Government of France for navigational aids. 3/ External loan for cash requirements in 1979 and for acquisition of Crash, Fire and Rescue Equipment in 1980, to be repaid by the Government of Colombia. 4/ Sale of land at present Medellin airport. 5/ Includes all items with the Investment Plan including the proposed project. 6/ Assumes DAAC/FAN would retain two months working expense for 1979 and the balance of year 1977 cash would pay for work already contracted prior to 1978. 7/ Does not include the Col$ 267.3 million, since this disbursement in 1984 is after project works are completed and is the result of six-month period to effect disbursements.

6.21 Projected balance sheets for 1978-1990, which reflect revalued assets, are included in Table 6.10. Since it is not certain that the current asset base has been adequately revalued or what the actual future price increases will be, it was agreed during negotiations that a study would be carried out by a consultant who would provide for the valuation and revaluation of assets in subsequent years. A provision for this study is included in the loan (paras 4.42 and 6.12). The final report should be completed by January 1, 1980, and DAAC should implement the recommendations agreed upon in consultation with the Bank. Rates of return for DAAC/FAN (para 6.10) would be reviewed in light of the results of this study. Agreement on these points was reached during negotiations. - 45 -

VII. AGREEMENTSREACHED AND RECOMMENDATION

7.01 During negotiations,assurances were obtained from the Government regarding the following:

(a) that DAAC would, with technical assistance to be provided under the project, undertake a review of its tariff-settingprocedures, provide such review to the Bank for comments by January 1, 1980 and establish improved guidelines for approving fare adjustments by June 30, 1980 (para 2.17); (b) that a study of DAAC's accounting system and a determinationof whether its volume of activity warrants computerizationwould be conducted by a consultantwith a loan from FONADE and completed by July 1, 1979, that the Bank would be consulted about the implementa- tion of the recommendationsof the study and that the recommenda- tions accepted would be implementedby December 31, 1979 (para 3.11); (c) that, until the closing date of the project, the non-projectinvestment plan would be reviewed annually by DAAC and the Government in consulta- tion with the Bank (para 3.15); (d) that adequate maintenance in accordance with accepted practicesand good engineeringconcepts would be provided at all facilities of DAAC/FAN (para 3.18); (e) t.hatOlaya Herrera Airport would be closed upon completion of the new airport at Rionegro, the land sold, and the proceeds of the sale t:urnedover to FAN and that, prior to the sale of the land, a study of potentialuses of the site would be made by the Government or its consultants,in consultationwith the Bank, by the beginning of 1981 (para 4.13); (f) t:hatthe portion of the new Medellin airport access road outside of t:heairport property line would be turned over to the Ministry of Public Works and Transport for ownership and maintenance (para 4.14); (g) that no additional works other than the proposed project and other investmentsin the approved plan would be carried out at Crespo and that, in consultationwith the Bank, DAAC would prepare an aviation master plan for the Cartagena area through the year 2000 and present it to the Bank for review by June 30, 1980 (para 4.19); (h) that a study of customs procedures would be made by FALPRO and that the recommendationsof the study would be implementedas agreed between the Government and the Bank before June 30, 1979 (para 4.33); (i) that all advisory personnel assigned to this project would be selected in consultationwith the Bank (para 4.39); (j) that a training plan would be prepared by DAAC, with suitable assis- tance and in consultationwith the Bank, by January 1, 1979 (para 4.40); (k) that the financial consultants'final report would be completedby January 1, 1980 and that DAAC would implement those recommendations agreed upon in consultationwith the Bank (paras 4.42 and 6.21); (1) that DAAC/FAN would make the necessary arrangementsto collect all revenues in accordance with current tariff regulations (para 6.08); - 46 -

(m) that tariffs and other charges would be maintained to keep them constant in real terms at their 1977 year end level for the period 1979 through 1982 (para 6.09); (n) that the Governmentwould make available to DAAC/FAN, annually, sufficient funds to cover its salaries and miscellaneousexpenses for the period 1978-1982 (para 6.09); (o) that such adjustmentsto tariffs as are necessary would be applied to produce sufficientrevenues to allow DAAC/FAN to cover all operating expenses,investment and debt service after 1982 and to achieve a return on annually revalued net fixed assets of no less than 6% in 1980, 7% in 1981 and 8% in 1982 and thereafter (para 6.10); (p) that the project airports would meet the following individual financial goals: operating ratios would be no greater than 85 at Medellin,45 at Bogota and 45 at Cartagenaby 1983 and gradually decline thereafter(para 6.10); (q) that FAN would not incur any long-term debt unless its net revenues for the fiscal year next preceding such incurrenceor for a later twelve-monthperiod ended prior to such incurrence,whichever amount is greater, shall not be less than 1.5 times the maximum long-term debt service requirementfor any succeeding fiscal year on all long- term debt, includinglong-term debt proposed to be incurred (para 6.11); (r) that the new accounting system would be implementedand a review of user charges completedby a consultantand sent to the Bank for comment by January 1, 1980 followed by preparationof an improved structureof airport user charges by June 30, 1980 (para 6.12); (s) that receivablesand payables would not exceed 25% of operating revenues and working expenses respectively(para 6.13); (t) that DAAC/FAN would furnish to the Bank certifiedcopies of the audited annual accounts by independentauditors satisfactory to the Bank, not later than four months after the end of each calendar year (para 6.14); and (u) that, except for investmentsalready in the approved five-yearplan, FAN would consult the Bank on any investmentabove US$1.0 million at any one airport until the closing date and that FAN would obtain the concurrenceof the Bank before committing itself to any other capital expenditureswhich would be greater than 20% of planned investments in the agreed developmentprogram in any given year (para 6.16).

7.02 It would be a conditionof disbursementon the training and technical assistancecomponents of the loan that contracts,agreeable to the Bank, between a suitable entity and DAAC, covering such training and technical assis- tance, would have been entered into by that entity and DAAC (para 4.40). 7.03 It would be a conditionof loan effectivenessthat a Subsidiary Agreement satisfactoryto the Bank, between the Government and FAN, would have been executed and delivered (para 4.43). 7.04 The proposed project constitutesa suitable basis for a Bank loan of US$61.0 million to the Republic of Colombia for transfer to FAN. The terms would be 17 years, includinga grace period of four years.

September28, 1978 -47- TABLE 1.1

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Intercity Transport by Mode

PASSENGER KILOMETERS 1/ FREIGHT-TONKILOMETERS (Million) (Million) (excludingpipelines)

AIR RAIL RIVER RAIL HIGHWAY RIVER COASTAL AIR SHIPPING 1966 946 491 2 1114 3383 1125 837 34 1967 952 418 1 996 3566 1317 860 33 1968 917 351 1 1125 3770 1312 890 35 1969 1018 273 6 1159 3985 1314 736 36 1970 1181 235 1 1173 4236 1333 786 45 1971 1198 267 7 1150 4497 1359 843 40 1972 1276 380 4 1198 4765 1397 2087 43 1973 1325 411 4 1331 4720 2003 2482 48 1974 1264 467 4 1329 4790 2585 3240 51 1975 1398 508 4 1139 6138 2366 2476 46 1976 1525 511 5 1159 8090 1686 2494 40

1/ Comparable data for road passenger traffic an not available, although vehicle count data suggest-it would be the predominant mode.

Source: DepartamentoAdministrativo Nacional de Estadistica,Ministry of Public Works and Transport, DAAC and Mission Estimates

May 1978 -48- TABLE 1.2

COLOMBIA

DOMESTIC AVIATION DEVELOPMENTPROJECT

IBRD-IDA Involvementin Colombia Transport

Highways

Loan 43-CO 1951 US$ 16.50 First Highway Project

Loan 84-CO 1953 US$ 14.35 Second Highway Project

Loan 144-CO 1956 US$ 16.50 Third Highway Project

Loan 295-CO 1961 US$ 19.50 Fourth Highway Project Credit 05-CO 1961 US$ 19.50

Loan 550-CO 1968 US$ 17.20 Fifth Highway Project

Loan 680-CO 1970 US$ 32.00 Sixth Highway Project

Loan 1471-CO 1977 US$ 90.00 Seventh Highway Project

225.55

Railways

Loan 68-CO 1952 US$ 25.00 First Railway Project

Loan 119-CO 1955 US$ 15.90 Second Railway Project

Loan 267-CO 1960 US$ 5.40 Third Railway Project

Loan 343-CO 1963 US$ 30.00 Fourth Railway Project

Loan 551-CO 1968 US$ 18.30 Fifth Railway Project

Loan 926-CO 1973 US$ 25.00 Sixth Railway Project

119.60

GRAND TOTAL 345.15

Source: IBRD

April 1978 -49- TABLE 2.1

COLOMBIA

DOMESTIC AVIATION DEVELOPMENTPROJECT

Airport Traffic

1. Domestic Services Departing Passenger 000 Cargo Embarked, Tons 1972 1973 1974 1975 1976 1972 1973 1974 1975 1976 Barranquilla 240 256 262 279 290 18948 23506 19727 16093 11692 Bogota 807 889 895 1053 1240 33170 35897 34169 39614 42267 Bucaramanga 91 79 90 85 105 873 734 541 617 616 BarrancabermejaL 28 23 17 16 18 146 160 151 59 143 Cali 299 318 289 361 418 4497 4392 4447 4886 5675 Cartagena 119 133 137 156 185 3766 6078 4656 3878 3047 Cucuta 114 117 111 140 200 2756 2340 1984 2299 2792 Leticia 5 7 9 10 11 713 1059 1791 1250 1877 Medellin 477 490 473 501 568 7033 6992 6286 7547 7098 Monteria 33 34 37 38 40 234 171 303 812 308 Pasto 25 38 36 37 47 345 309 267 217 68 San Andres 97 104 103 113 116 133 217 208 363 320 Santa Marta 73 76 63 72 87 761 928 1320 1332 917 Others 480 514 489 465 523 7935 11672 13618 6201 7934

TOTAL 2888 3078 3011 3326 3848 81310 94455 89468 85168 84754

2. InternationalServices

Departing Passengers 000 Cargo Handled, Tons 1972 1973 1974 1975 1976 1972 1973 1974 1975 1976

Barranquilla 48.9 54.3 60.5 62.9 63.8 7492 6261 8128 6648 4155 Bogota 204.9 240.8 269.9 285.2 296.4 19066 19732 29419 31566 35824 Cali 22.4 23.0 26.7 28.0 30.1 1199 1859 2323 2796 Cartagena 3.8 5.1 6.3 7.2 8.8 93 112 138 137 483 Medellin 25.4 30.2 33.5 35.8 42.6 1274 1853 3022 4217 4301 San Andres 17.4 18.0 29.2 35.2 29.0 1029 1191 1563 1395 Others 3.6 5.3 3.4 4.3 - 26 517 2003 1390 1874

TOTAL 325.7 376.6 429.4 458.4 470.7 27951 30703 45760 47844 50828

Source: DAAC, DANE

April 1978 -50- TABLE 2.2

COLOMBIA

DOMESTIC AVIATION DEVELOPMENTPROJECT

Domestic Traffic Flows 1976

1. Passengers 000

Destination ------Origin------Bogota Medellin Barranquilla Cartagena Cali National

Barranquilla 150 44 - 5 17 290 Bogota - 248 146 107 245 1264 Bucaramanga 61 17 11 4 111 Cali 242 64 17 11 - 413 Cartagena 105 28 3 - 12 180 Cucuta 110 28 13 6 1 182 Medellin 242 - 45 28 63 569 Pereira 79 38 5 5 16 155 San Andres 52 16 12 11 16 118 Santa Marta 49 11 .. 6 5 82 Others 149 76 26 2 43 443

2. Freight, tons

Destination ------Origin------Bogota Medellin Barranquilla Cartagena Cali National

Barranquilla 7731 607 - 36 805 9842 Bogota - 1623 7701 2250 2753 19857 Bucaramanga 815 159 188 29 .. 1262 Cali 3851 458 593 124 - 5513 Cartagena 2860 292 172 - 437 3881 Cucuta 1761 277 182 35 4 4221 Medellin 3727 - 666 211 545 5995 Pereira 854 198 67 90 74 1320 San Andres 1298 283 342 97 296 2355 Santa Marta 666 101 61 4 52 932 Others 4534 514 407 18 478 10547

Source: DepartamentoAdministrativo Nacional de Estad'stica

April 1978 -51- TABLE 2.3

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Domestic Air Fares - Colombia

Route Distance Fare Km $US US¢ per Km

Bogota - Medellin 233 11-19 4.7 - 8.2 - Cartagena 659 23-33 3.5 - 5.0 - Barranquilla 692 24-34 3.5 - 4.9 - Cali 288 16-22 5.6 - 7.6 - Leticia 1086 8-64 0.7 - 5.9

Caracas - Acarigua 274 16.80 6.1 Rio de Janeiro - Belo Horizonte 344 30.0 8.7 Quito - Guayaquil 274 15-18 5.5 - 6.6 Lima - Anta 307 19.50 6.4 La Paz - Cochabamba 241 20.00 8.3 City - David 346 22.00 6.4

Caracas - Maracaibo 510 29.80 5.8 Rio de Janeiro - Curbita 674 58.80 8.7 Lima - Cuzco 574 37.70 6.6 La Paz - Santa Cruz 552 40.00 7.2 Santiago - El Salvador 793 60.00 7.6

Rio de Janeiro - Brasilia 925 68-83.40 7.4 - 9.0 Lima - Iquitos 1018 41.00 4.0 Santiago - Antofagasta 1110 62.0 5.6

Source: Official Airline Guide

March 1978 -52- TABLE 2.4 Page 1

COLOMBIA

DOMESTIC AVIATION DEVELOPMENTPROJECT

Visitor and Hotel Capacity - Cartagena

1. Accommodationlicensed by the CorporationNacional de Turismo

Beds available 1976 - 3122 New hotels, 1977 - 974 Cartagena Hilton, opens 1979 - 600

Total available 1980 - 4696

Bed nights, tourist season, Nov-Mar - 709,096 Bed nights sold 1976, per passenger - 3.4

Projectionsof Hotel Capacity for Tour Traffic

Bed Nights Regular Traffic Capacity for Charters Charter Available Nov-Mar Nov-Mar Traffic (current Passengers/Pass.Nights Bed Nights/Passengers Projection capacity) (at 3.4 nights) (av 8 nights) Nov-Mar

1976 471422 86200 263700 207722 25965 14000 1980 709096 128900 317400 391696 48962 17600 1981 709096 139200 473280 235816 29477 18000 1982 709096 150400 511360 197736 24717 18400 1983 709096 163400 555560 153536 19192 18800 1984 709096 176900 601460 107636 13454 19200 1985 709096 191200 650080 59016 7377 19600 1986 709096 206900 703460 5636 705 20000

2. Total Accommodation,including Condominiumsand Guest Houses

Beds Available 1977 - 8000 Cartagena Hilton, opens 1979 - 600

Total, 1980 8600 -53- COLOMBIA TABLE 2.4 Page 2 DOMESTIC AVIATION DEVELOPMENT PROJECT Projections of Hotel Capacity for Tour Traffic

Bed Nights Regular Traffic Capacity for Charters Charter Avai]able Nov-Mar Nov-Mar Traffic (current Passengers/Pass. Nights Bed Nights/Passengers Projection capacity) (at 3.4 nights) (av 8 nights) Nov-Mar

1976 1208,000 86200 263700 994300 118040 14000 1980 12913,600 128900 317400 931200 122650 17600 1981 1293,600 139200 473280 825320 103170 18000 1982 12913,600 150400 511360 787240 98400 18400 1983 1298,600 163400 555560 743040 92880 18800 1984 1298,600 176900 601460 697140 87140 19200 1985 1293,600 191200 650080 648520 81070 19600 1986 1293,600 207900 703460 595140 74390 20000 1987 1293,600 224000 761600 527000 67130 20400 1988 129B,600 242900 825900 472700 59090 20800 1989 1298,600 263100 894500 404100 50510 21200 1990 1298,600 284700 968000 330600 41330 21600

3. International Standard Accommodation

Beds, 3,4, and 5 star accommodation, 1976 - 416 Additions, 1977 - 974 Cartagena Hilton - 600

Available 1980 1990

Projections of Hotel Capacity for Tour Traffic

International Foreign Visitors Capacity for Charters Charter Standard Regular Traffic Nov-Mar Projections Bed Nights Nov-Mar Bed Nights/Passengers Nov-Mar Passengers/Pass. Nights (av 8 nights) (at 3.4 nights)

1976 62816 8400 25200 37616 4700 14000 1980 300490 9240 27720 272770 34100 17600 1981 300490 10100 30300 270190 33770 18000 1982 :300490 11400 34200 266290 33290 18400 1983 :300490 12760 38280 262210 32780 18800 1984 300490 14080 42240 258250 32280 19200 1985 :300490 15400 46200 254290 31790 19600 1986 :300490 17160 51480 249010 31130 20000 1987 300490 19400 58200 242290 30290 20400 1988 300490 21600 64800 235690 29460 20800 1989 300490 23800 71400 229090 28640 21200 1990 300490 26400 79200 221290 27660 21600

Source: Corporacion Nacional de Turismo

April 1978 -54- TABLE 2.5 Page 1

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Air Traffic Forecasts

1. DOMESTIC AIRLINES

Bogota Medellin Cartagena Passenger Freight Aircraft Passenger Freight Aircraft Passenger Freight Aircraft Departures Handled Landings Departures Handled Landings Departures Handled Landings (000) (Tons) (000) (Tons) (000) (Tons) 616-261I7 /1 / 1971 803 61064/1 26818 475 171684- 25008 105 8 8 6 4 "L 3952 1976 1249 60571 23067 568 12616 16087 185 6995 6222 1978 1456 64900 25070 623 13100 17750 223 7100 5950 ]Q7q 1573 672on ?5Q20 '5 l n lR-A 970 7?AnnA 1980 1699 69500 26790 685 13600 19490 270 7200 6750 1985 2405 89300 34840 838 17300 23200 396 9300 9000 1990 3295 109200 44000 1005 20600 25650 582 11500 11480 1995 4409 133400 55110 1206 22700 28050 - 780 14000 14180 2000 - - - 1459 25100 30400 - - - /1 1971 is total freight movement; 1976 and forecast years count trans-shipped freight only once. Freight estimates for 1978 and 1979 are interpolated.

2. INTERNATIONAL TRAFFIC

Bogota Medellin Cartagena Passenger Freight Aircraft Passenger Freight Aircraft Passenger Freight Aircraft Departures Landings Departures Landings Departures Landings (000) (Tons) (000) (Tons) (000) (Tons)

1971 184 15339 3584 22 598 437 3 118 52 1976 296 35824 6109 43 4301 679 23 483 191 1978 359 49100 6650 55 6600 920 29 800 360 1979 395 575nn 0Rnn 69. 8200 980 32 1100 350 1980 434 67500 7250 71 10200 1090 37 1400 480 1985 673 108700 9000 120 20500 1700 52 2800 690 1990 998 175100 12480 189 41200 2450 76 4500 1030 1995 1413 257300 16430 277 66400 3200 117 6600 1480 2000 - - - 392 106900 4100 - - -

Source: Consultants and IBRD Mission

April 1978 COLOMBIA TABLE 2.5 Page 2 DOMESTIC AVIATION DEVELOPMENT PROJECT

3. AIRCRAFT MIX FORECAST - SCHEDULED SERVICES

Widebodies 150 seat air- 100 - 130 seats 20 - 50 seats Light B747, A300 craft B727-100, L188 F27, HS748 Aircraft B707, B720 SE210 DHC6, DH114 Dom Int Dom Int Dom Int Dom Int Dom Int

Bogota - 1977 0.8 10.2 14.2 70.5 64.3 19.0 13.3 - 7.5 0.3 1981 4.0 20.0 12.0 60.0 66.0 19.0 15.0 - 3 1 1986 6.0 25.0 10.0 55.0 68.0 19.0 15.0 - 3 1 1991 8.0 30.0 10.0 50.0 68.0 19.0 15.0 - 3 1

Medellin - 1976 - - 15.9 100.0 39.9 - 33.7 - 10.5 - 1982 - 3.0 11.0 97.0 39.0 - 31.0 - 19.0 - 1992 - 5.0 7.0 95.0 45.0 - 33.0 - 15.0 - 2002 - 10.0 4.0 90.0 53.0 - 40.0 - 3.0 -

Cartagena - 1977 - - 21.0 85.2 64.0 14.8 0.5 - _ 14.5 - 1980 0.4 17.0 22.0 73.0 61.6 10.0 0.5 - 15.5 - 1985 0.6 17.0 23.0 73.0 59.4 10.0 0.5 - 16.5 - 1990 0.8 18.0 24.0 73.0 58.2 9.0 0.5 - 16.5 - 1995 1.2 19.0 24.0 72.0 56.8 9.0 0.5 - 17.5 -

4. PEAK HOUR FORECASTS - SCHEDULED SERVICES

Bcogota Medellin Cartagena Domestic International Domestic International Domestic International Pass Aircraft Pass Aircraft Pass Aircraft Pass Aircraft Pass Aircraft Pass Aircraft

1976 950 14 830 9 260 7 100 2 250 8 46 1 1980 1290 16 1210 11 540 12 200 2 370 9 46 1 1985 1640 19 1700 15 650 14 250 2 490 11 70 1 1990 2030 22 2200 22 790 16 290 3 700 13 104 1 1995 2440 24 2800 28 940 17 350 4 880 14 156 1

Source: Consultants and IBRD Mission

April 1978 -56- TABLE 3.1

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Planned Non-Project Investments, DAAC (Col $, Million)

1978 1979 1980 1981 1982 1983 TOTAL

1. CIVIL WORKS (a) Major Airports Barranquilla 215.0 250.0 4.1 469.1 Cartagena 50.0 5.1 55.1 Medellin 2.0 2.0 10.0 10.0 San Andres 20.0 20.0 40.0 Cucuta 2.0 26.0 29.0 57.0 Cali 10.0 10.0 10.0 30.0 Valledupar 5.0 15.0 20.0 Pasto 10.0 10.0 Bucaramanga 45.0 45.0 Others 10.0 10.0 20.0

294.0 270.1 60.1 114.0 10.0 10.0 758.2

(b) Regional Airports

16.0 - 25.0 90.0 55.0 186.0

(c) Llanos/Amazonas 8.0 - 12.0 85.0 100.0 90.0 295.0

Sub-Total 318.0 270.1 72.1 224.0 200.0 155.0 1,239.2

2. EQUIPMENT & STUDIES

Studies 3.0 4.0 5.0 5.0 5.0 5.0 27.0 Navigation Aids 40.0 450.0 191.3 118.3 36.6 140.3 976.5 Maintenance Equip. 188.0 188.0

Sub-Total 43.0 454.0 384.3 123.3 41.6 145.3 1,191.5

TOTAL 361.0 724.1 456.4 347.3 241.6 300.3 2,430.7 1/ Price Contingencies- - 1.9 294.4 160.8 210.4 321.5 989.0

TOTAL 361.0 726.0 750.8 508.1 452.0 621.5 3,419.4

1/ As used on project investment Source: DAAC

August 1978 TABLE 4.1 Page 1

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Cost Estimates

Col$ (million) US$ (million) Foreign Local Foreign Total Local Foreign Total Component

Cartagena

Apron Enlargment 41.50 50.72 92.22 1.10 1.35 2.45 55.10 Auto Parking & Access Road 5.95 7.28 13.23 .16 .19 .35 54.29 Runway Extension & Holding Apron 11.24 13.73 24.97 .30 .37 .67 55.22 Runway Strengthening 16.78 25.19 41.97 .45 .67 1.12 59.82 Drainage 1.29 .89 2.18 .03 .02 .05 40.00 Lighting 2.16 8.64 10.80 .06 .23 .29 79.31 Electric Plant .79 3.19 3.98 .02 .08 .10 80.00 Comm. and Navaids 1.64 14.86 16.50 .04 .40 .44 90.91 CFR Building 1.82 1.20 3.02 .05 .03 .08 37.50 Engineering 9.98 7.53 -17.51 .27 .20 .47

Sub-total 93.15 133.23 226.38 2.48 3.54 6.02 58.80

Bogota

Apron Strengthening 5.51 4.49 10.00 .15 .12 .27 44.44 Taxiway Strengthening 24.74 20.26 45.00 .66 .54 1.20 45.00 Initial Apron Widening 15.40 12.60 28.00 .41 .34 .75 45.33 Strengthen Taxiway Connections 5.56 4.44 10.00 .15 .12 .27 44.44 Pave Runway Shoulders 3.60 4.40 8.00 .10 .12 .22 54.55 International Apron 6.58 5.42 12.00 .18 .14 .32 43.75 Pave Taxiway Shoulders 3.60 4.40 8.00 .10 .12 .22 54.55 Apron Drainage 22.00 18.00 40.00 .59 .48 1.07 44.86 Domestic Apron 8.24 6.76 15.00 .22 .18 .40 45.00 Taxiway Leadoffs 13.47 16.53 30.00 .36 .44 .80 55.00 Strengthen Cargo Apron 16.51 13.49 30.00 .44 .36 .80 45.00 Apron Lighting .49 4.51 5.00 .01 .12 .13 92.31 Parking Lot 4.51 5.49 10.00 .12 .15 .27 55.56 Access Road 6.31 7.69 14.00 .17 .20 .37 54.05 Cargo Terminal 13.20 10.80 24.00 .35 .29 .64 65.31 International Ternminal 26.67 17.85 44.52 .71 .47 1.18 39.83 Domestic Termina:L 29.80 19.90 49.70 .79 .53 1.32 40.15 Navaids 2.11 18.89 21.00 .06 .50 .56 89.29 Engineering 12.51 11.74 24.25 .33 .31 .64

Sub-total 220.81 207.66 428.47 5.87 5.52 11.39 48.46 TABLE 4.1 -58- Page 2

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Cost Estimates

Col$ (million) US$ (million) Foreign Local Foreign Total Local Foreign^ Total Component

Medellin

Land Acquisition 45.00 - 45.00 1.20 - 1.20 0.00 Earth Moving 185.25 279.46 464.71 4.93 7.43 12.36 60.11 Airport Paving 113.43 253.06 366.49 3.02 6.73 9.75 69.03 Drainage 31.47 13.51 44.98 .84 .36 1.20 30.00 Access Road 57.85 112.88 170.73 1.54 3.00 4.54 66.08 Public Services 31.00 59.00 90.00 .82 1.57 2.39 65.69 High Tension Relocation 8.00 32.00 40.00 .21 .85 1.06 80.19 Terminal Building 96.00 64.00 160.00 2.55 1.70 4.25 40.00 T.B. Furniture 22.00 14.67 36.67 .59 .39 .98 39.80 Cargo Building 9.73 6.47 16.20 .26 .17 .43 39.53 CFR Building .93 8.13 9.06 .02 .22 .24 91.67 Special Systems Equipment 5.21 46.82 52.03 .14 1.25 1.39 89.93 Special Systems Installation 6.40 1.60 8.00 .17 .04 .21 19.05 Lighting Navaids, etc. Equipment 11.00 99.00 110.00 .29 2.63 2.92 90.00 Lighting Navaids, etc. Installation 26.39 6.61 33.00 .70 .18 .88 20.45 CFR Equipment 5.51 49.51 55.02 .15 1.32 1.47 89.80 Engineering 59.62 62.79 122.41 1.59 1.67 3.26

Sub-total 714.79 1109.51 1824.30 19.01 29.51 48.52 60.82

Technical Assistance 2.88 26.00 28.88 .08 .69 .77 89.61 Training 3.65 14.80 18.45 .10 .39 .49 79.59 UNDP Consultant (FALPRO) 1.28 2.60 3.88 .03 .07 .10 70.00 Financial Consultant 4.64 9.28 13.92 .12 .25 .37 67.57 Master Plan Consultant 7.40 14.80 22.20 .20 .39 .59 66.10 FFI Aircraft 55.56 81.40 136.96 1.48 2.16 3.64 59.34 A/C Spares - 14.06 14.06 - .37 .37 100.00 Avionics Console - 28.49 28.49 - .76 .76 100.00 Second Unit - 29.60 29.60 - .79 .79 100.00 Elec. Spares & Ground Equip. - 12.96 12.96 - .34 .34 100.00 Type Training (A/C & Elect.) - 1.86 1.86 - .05 .05 100.00

Sub-total 75.41 235.85 311.26 2.01 6.27 8.28 75.72

Physical Contingency 10% Cartagena 9.32 13.33 22.65 .25 .35 .60 Bogota 22.08 20.78 42.86 .59 .55 1.14 Medellin 71.53 110.95 182.48 1.90 2.95 4.85 Other 7.53 23.58 31.11 .20 .63 .83

Sub-total 110.46 168.64 279.10 2.94 4.49 7.43 -59- TABLE 4.1 Page 3

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Cost Estimates

Col$ (million) US$ (million) Foreign Local Fcreign Total Local Foreign Total Component

Cartagena 43.40 78.32 121.72 .19 .51 .70 Bogotc 146.44 161.18 307.62 .65 1.05 1.70 Medellin 716.91 1430.77 2147.68 3.19 9.30 12.49 Other 38.45 153.73 192.18 .17 1.00 1.17

Sub-Tcotal 945.20 1824.00 2769.20 4.20 11.86 16.06

Grand Total 2159.82 3679.30 5839.12 36.56 61.20 97.76 62.60

Source: Consultants Reports and Mission Estimates.

September 1978 -60- TABLE 4.2

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Disbursement Schedule

US$ (in millions) FY 79

June 1979 1.08

FY 80

September 1979 3.19 December 1979 5.82 March 1980 8.74 June 1980 16.57

FY 81

September 1980 19.05 December 1980 21.18 March 1981 23.64 June 1981 26.55

FY 82

September 1981 30.15 December 1981 34.32 March 1982 38.16 June 1982 41.81

FY 83

September 1982 46.15 December 1982 50.16 March 1983 54.20 June 1983 57.00

FY 84

September 1983 57.58 December 1983 57.78 March 1984 58.24 June 1984 61.00

Source: IBRD Mission

April 1978 -61- TABLE 5.1

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Vehicle Operating Costs

1. Aircraft

Direct Operating Costs, Col$ Der hour Group Types Service Economic Costs 19801/ Types 1978 ~~~~flyingtimeStanding

Widebodies B747, A300 Int 94990 95960 24620

130-150 seats B707, B720 Int/Dom 68540 69690 16300

100-30 seats B727, L188, SE210 Dom 65880 66700 16800

20-50 seats F27, DHC6 Dom 13820 15000 5630

Light Aircraft Dom 3700 3720 1490

2. Interurban Road Vehicles

Operating Costs Economic Costs, 19801/ Vehicle per KmL1 Col$ 1977 Col$ -/2 1per kilometer per passenger Kn-= 1 2 3 4 1 2 3 4 1 2 3 4 Automobile, European 2.9 3.0 3.4 4.5 3.1 3.2 3.6 4.8 1.6 1.6 1.8 2.4 Automobile, American 6.1 6.6 7.6 10.0 6.6 7.1 8.0 10.6 3.3 3.6 4.0 5.3 Taxi 4.6 5.0 5.9 8.2 4.9 5.2 6.0 8.2 1.1 1.2 1.3 1.8 Buseta (20 seats) 7.1 7.3 8.7 12.8 7.6 7.7 8.9 12.8 0.4 0.4 0.5 0.7 Bus (35 seats) 9.5 9.1 10.2 14.7 10.4 9.9 10.9 16.0 0.4 0.3 0.4 0.6 /1 1 - flat terrain, 2 - rolling terrain, 3 - mountainous terrain, 4 - steep terrain T2 Assumed passengers per vehicle are: European automobile, 2, American automobile, 2, Taxis, 4.5, Busetas, 18, Buses 29.

3. Urban Road Vehicles 1/ Cost per Passenger January Economic Costs, 1980 Col$-: 1977 Col$ Per Passenger Per Passenger Km.

Automobile 22.8 20 2.0

Bus 2.1 2.3 0.2

1/ At 1978 prices.

Source: Consultants ard IBRD Mission -62- TABLE 5.2

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Domestic Passenger Time Values Medellin 1977

(1) Passenger Journey Purpose - Medellin

Sofreavia /l /2 /3 Average Used Survey Total Avianca Others Avianca MOPT - in Appraisal

Business 30.5 43.0 20.0 64.0 47.8 48.9 Holiday 65.0 55.0 75.0 12.0 31.7 31.3 Other 4.5 2.0 5.0 24.0 20.5 19.8

100.0 100.0 100.0 100.0 100.0 100.0 /1 Economic and Operational Study of Air Traffic, Sofreavia, 1972 /2 Avianca in flight survey, 1977 /3 Ministry of Public Works and Transport, Journey purpose survey, 1977

(2) Domestic Passenger Time Values 1977

Monthly Average Income % of Travellers/ /1 Group Family Personal- Business Holiday Other Total (Col$) (Col$)

1 12100 8480 8.5 5.4 19.8 33.7 2 24100 16870 17.7 11.5 - 29.2 3 37650 26350 8.4 5.3 - 13.7 4 60240 42165 7.1 4.5 - 11.6 5 75300 88020 7.2 4.6 - 11.8

48.9 31.3 19.8 100.0

Average Time Value per hour (Col$) 224/3 56- 53 138/5 /1 Estimated at 70% of family income. /2 Details estimated, assuming travellers for "other" purposes (health, edu- cation, etc.) are drawn primarily from lower income groups; business and holiday traffic is spread proportionately with column and row totals to all income groups. /3 No allowance is made for overhead costs. /4 taken at 25% of real income /5 Time values are increased at 2% p.a. to reflect expected increases in real income.

Source: IBRD Mission

April 1978 -63- TABLE 5.3

COLOMBIA

DOMESTIC AVIATION DEVELOPMENTPROJECT

Economic Rates of Return

Rate of Return First Year S------SensitivityTests------% Return (i) Low Traffic (ii) Costs Up (iii) Value of Time +10% +20% Zero

Bogota 20 19 16 18 16 20 Medellin 24 13 14 22 20 27 Cartagena 14 17 17 12 10 14 Aircraft 15 17 15 13 11 15

Project 22 14 13 20 19 24

Distributionof Net Measured Benefits (discountedto 1983 at 12%) (Col$ million)

Bogota Medellin Cartagena Aircraft Project

ColombianAirlines -domesticservices 381 6239 70 275 6965 -internationalservices 556 330 102 33 1021

Domestic passenigers - (915) - - (915)

General Community - 1413 330 - 1743

TOTAL 937 7067 502 308 8814

Source: AppraisalMission August 1978 DOMES0TIC AVIATION DEVELiONENT PROJECT

C met Henii rstt Stre,un

. M ilI .nI in Lflr priern

BO_____00-IOTA H11.DELI.N5_ CARTArHENA F7l -i-raft P__DJEeT

Capital _Contr-c. r.xT l t A-ess. ..es 7tA ! apital_ Costs i7.aTa.l Inter-ist Lnsiestic Total & Opera- Airport Mai nte. lier Ti eSir Alt. 1-lan Ise TnL i Opera- Ai rc.raft Aisrport Tour t Total Cepital Hire Cost TOTAL TOTAL _ _ s-111tacilit Facilit tiLl Co-t ITn-stat nan-e pass OrsiAlt ransporini site fipg vt_ta n-route apron HTeveue SpeadinA Cost laci __ COT EFPC

1978 74.8 15 89.8 39.9 129.7 1979 211.9 165.3 10 175.3 146,o 171.4 704.6 1980 115.9 36.2 1n5 37.7 209.7 (30.3) 269.4 65.14 1.4 1.5 3.9 15.3 22.1 29.7 450.7 89.5 1981 116.1 45,2 3.3 49.1 626.1 (42.4) 583.7 .6 2.9 314 8.1 32. 46.7 30.7 704.4 126.5 1982 49.7 4.7 41.2 95.6 903.6 (68.9) 834.7 4.0 3.0 3.8 8.4 33.5 48.6 31.2 839.6 175.4 1983 55 4 5.7 44.5 105.6 20 (21.1) 3 245.9 247.8 385.5 67.2 93 545.7 5.2 3.1 4.2 8.6 34.7 50.6 31.7 253.0 733.4 1984 61 1 7.0 48.2 116.3 20 1 299.3 418.6 73.0 13i 622.(3 5.6 3.1 4.6 3.0 35.9 52.5 32.1 288.1 823.5 1985 68,1 8.5 52.2 128.8 20 (10.8) 3 273.6 285.8 493.6 82.6 171 (47.7 5.9 3.3 5.2 9.3 37.1 54.8 32.6 291.7 963.4 1986 75.4 10.3 56.6 142. 20 3 288.7 311.7 564.1 93.0 210 867.1 6.2 3.3 7.3 9.5 37.9 57.9 32.6 317.9 1099.9 1987 15.2 59.5 74.7 20 3 304.3 327.3 644.5 106.6 249 1000.1 6,6 3.4 1o.4 '.6 38.7 62.1 32.6 333.9 1169.5 1988 22.3 62.0 84.3 20 3 320.2 343.2 737.9 119.3 1'4 1051.7 6.0 3.6 14.8 9.8 439.4 67.6 32.6 350.1 1235.7 1989 32.9 64.8 97.7 20 (14.I) 3 330.0 347.9 762.0 126.1 194 1082.1 7.3 3.6 21.1 11.0 0.i 74.8 32.6 355.a 1287.2 l95LO 48,4 67.6 116.0 38.8 (34.4) 3 357.9 365.3 762.5 130.7 13 72. 194i 1173.0 7.6 3.6 30.3 10.2 40.9 85.0 32.6 372.9 1406.6 1991 71.2 71.0 142.2 57.5 (10.8) 3 377.7 427.4 763.0 135.8 14 128.5 1941 1235.3 32.6 42T.4 11410.1 1992 38.8 3 398.7 440. 5 763.1 141.4 20 216.9 1i34 1335.4 1,41. 5 1335.4 1993 20 3 421.2 444.7 756.4 146.2 28 "95.2 194 1411.8 444.2 1419.8 1994 20 3 444.9 1522.1 467.9 759.4 36 367.7 1 4 1524.7 467.9 1524.7 1995 20 3 470.0 493.3 756.4 158. I'71' 485.9 194 164i.5 1996 493.3 1641 . 20 (21.5) 3 436.7 438.2 753.3 164.7 08 611.8 194 1781.8 498.:2 1781.8 19571i999987 20 (10.8) 3 524.6 536.8 752 .3 171.8' 71 348.0 194 1137.1 536.8 1937.1 5( 4 3 544 572.0 744.1~ 178.0 85 8Y.6 104 71I01.5 572.0 2101.5 1999 20 3 586.0 609.0 74 3.9 185.7 100 1077.0' 94 2300.6 604.o 2300.6 2000 20 (34.3) 3 619.3 608.0 742.9 193.8 I 11. 1329}. 7 1'04 578.0 608.0 2578.9 2001 20 (12.3) 3 654.6 665.3 741.1) 202.4 138 1502.2 194 2778.5 665.3 2758.5 2002 20 (171.7) 3 692.0 593.3 735.3 20O1.8 160 1742.7 1"14 3041.0 593.3 3041.8 2003 70 (10.8) 3 728.6 740.31 735.3 218.8 185 13)63.7 19 4 3204.0 740.8 3296.8

Sour-e- DIB7ORD sisi

April 1',78 -65- TABLE 5.5

COLOMBIA

DOMESTIC AVIATION DEVELOPMENTPROJECT

Proposed Flight Inspection Program

Flight AIRCRAFT WORKLOAD No. in Test Tm4e DC,3 New Aircraft Equipment Service Schedule Ttme D3Ne Arcaf EquipmentScdl Sri per test Hours per Hours per hQurs Equip year Equip year

Distance Measuring Equipment (DME) 15 6 months 4 15 120

Visual Omni Range (VOR) 28 6 months 20 13 520 15 600

Instrument Landing System (ILS) 3 3 months 35 3 420

Non-directional Beacon (NDB) 75 12 months 10 32 320 43 430

Radar 4 12 months 25 4 100

Visual Approach Slope Indicator (VASI) 21 6 months 5 17 170 4 40

Approach Lighting System (ALS) 4 6 months 5 4 40

TOTAL 150 - - 62 1010 88 1750

Source: DAAC

April 1978 COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

DAAC/FAN

Operating Statements (Col.$ Millions)

Revenues Working Expenses 2/ Budget from 1/ FAN Revenues Working Year Ended Ministry from Surplus/ December 31 of Finance Operations Total Salaries Other Total Deficit

1970 13.9 88.2 102.1 35.8 19.6 55.4 46.7 1971 19.6 108.2 127.8 47.1 31.3 78.4 49.4 1972 26.7 143.1 169.8 57.4 49.3 106.7 63.1 1973 29.1 239.1 268.2 76.1 40.3 116.4 151.8 a 1974 33.1 303.9 337.0 93.3 38.9 132.2 204.8 1975 56.7 355.0 411.7 153.4 74.1 227.5 184.2 1976 63.0 546.1 609.1 262.0 98.0 360.0 249.1 1977 84.0 769.5 853.5 338.0 140.0 478.0 375.5

1/ Budget from the Ministry of Finance is calculated at 25% of Working Expenses for the years 1970 through 1975 as stated by DAAC/FAN. 1976 and 1977 as reported by DAAC/FAN. 2/ Provision for Maintenance has been included under investment by DAAC/FAN and is shown in the cash flow Table 6.2. DAAC/FAN has not accounted for this as a separate item.

Source: DAAC/FAN-IBRD mission

May 1978 COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

DAAC/FAN

Cash Flow (Col.$ Millions)

Source of Funds Application of Funds Working Surplus Surplus Total Tota.L Annual Cummulative Cash 2/ Debt Service Cash Cash Cash Year Ended Currenj1 from National Loans December 31 Year - Prior Year Budget External Internal Available Investment External Internal Required Surplus Balance 1970 46.7 25.7 111.9 - 5.2 189.5 lL5.5 8.9 6.7 131.1 58.4 58.4 1971 49.4 49.8 96.3 15.0 1.8 212.3 167.8 7.2 4.7 179.7 32.6 91.0 1972 63.1 28.0 109.2 - 5.3 205.6 172.5 5.2 5.7 183.4 22.2 113.2 1973 151.8 22.3 55.5 - 54.1 283.7 211.0 19.5 10.2 240.7 43.0 156.2 1974 204.8 50.2 156.3 202.8 48.7 662.8 609.5 21.6 8.8 639.9 22.9 179.1 1975 184.2 66.1 - 414.6 76.7 741.6 652.0 57.5 19.9 729.4 12.2 191.3 1976 249.1 16.4 143.7 - - 409.2 169.1 164.0 74.8 407.9 1.3 192.6 1977 375.5 119.7 101.1 - 25.0 621.3 433.6 126.7 56.0 616.3 5.0 197.6

1/ Table 6.1 2/ Includes maintenance

Source: DAAC/FAN-IBRD mission

May 1978 -68- TABLE 6.3 COLOMBIA

DOMESTICAVIATION DEVELOPMENT PROJECT

DAAC/FAN

Summary Balance Sheets as of December 31 (Col.$ Million)

ASSETS 1976 1977

Current Assets Cash 611.4 814.3 Short-term Investments 22.4 136.6 Prepaid Items 30.6 52.4

Subtotal 664.4 1,003.3

Receivables 230.6 329.6 Inventories 1,439.5 1,447.0

Total Current Assets 2,334.5 2,779.9

Long-term Investments 80.6 59.3

Fixed Assets - Gross 1,744.1 1,831.1 Less AccumulatedDepreciation 431.5 514.8 Net Fixed Assets 1,312.6 1,316.3 Constructionin Progress 106.4 178.0

Total Fixed Assets 1,419.0 1,494.3

Other As-sets 58.7 63.1

TOTAL ASSETS 3,892.8 4,396.6

LIABILITIES

Current Liabilities 126.9 101.5

Long-term Debt 1,665.8 1,619.0

Other Deferred 11.1 11.3

Capital and Reserves 2,089.0 2,664.8 (Closing December 31)

TOTAL LIABILITIES 3,892.8 4,396.6

Source: DAAC/FAN - IBRD Mission

ADril 1978 COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

DAAC/FAN Statement of Revenues (Col.$ Millions)

Domestic International Domestic International Year Ended Passenger Passenger Landing Landing Total December 31 Tax Tax Fees Fees Overflights Rentals Services Other Revenues

1978 213 1/ 205 2/ 163 183 30 55 21 11 881 1979 388 3/ 340 3/ 233 273 49 83 33 15 1,414 1980 __494 449 292 363 70 109 42 19 1 838 1981 614 575 355 461 96 138 53 25 2,317 1982 751 720 432 562 130 174 67 30 2,866 1983 851 838 487 640 165 204 79 35 3,299 1984 1,039 1,052 593 785 208 259 99 43 4,078 1985 1,103 1,145 619 841 230 283 109 45 1986 1,167 1,247 651 908 254 312 120 48 4,707 1987 1,236 1,348 681 985 278 344 134 53 5,059 1988 1,308 1,458 713 1,057 304 379 147 56 5,422 1989 1,386 1,578 748 1,143 336 417 160 61 5,829 1990 1,469 1,709 785 1,242 368 457 176 64 6,270

1/ Assumes only 80% of passengers pay. 2/ Assumes only 90% of passengers pay. 3/ Assumes all passengers, except those specifically exempt by tariff regulations, will pay in 1979 and thereafter. r

Source: DAAC/FAN and IBRD Mission

August 1978 COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

DAAC/FAN Projected Operating Statements (Col. $ Millions)

Revenues Working Expenses l/ Transfer to FAN Revenues Budget from CGovernment Working 3 Operating Net Year Ended from Ministry 10% of 2/ Surplus/ Income/ Profit/ ecembr of Finance Total Salaries Other Maintenance Revenue Total (Deficit) Depreciation (Loss) Interest (Loss) 1978 881 653 1,534 508 145 69 139 861 673 302 371 124 247 1979 1,414 800 2,214 622 178 120 141 1,061 1,153 363 790 162 628 1980 1,838 963 2,801 749 214 156 184 1,303 1,498 447 1,051 261 790 1981 2,317 1,129 3,446 878 251 167 232 1,528 1,918 486 1,432 322 1,110 1982 2,866 1,323 4,189 1,029 294 181 287 1,791 2,398 651 1,747 396 1,351 1983 4/ 3,299 - 3,299 1,208 345 242 - 1 795 1,504 861 643 459 184 1984 4,078 _ 4,078 1,417 404 251 - 2,072 2,006 907 1,099 445 654 1985 4,375 - 4,375 1,663 476 261 2,400 1,975 960 1,015 432 583 1986 4,707 - 4,707 1,694 484 272 - 2,450 2,257 1,012 1,245 381 864 1987 5,059 - 5,059 1,721 493 339 - 2,553 2,506 1,170 1,336 330 1,006 1988 5,422 - 5,422 1,763 504 350 - 2,617 2,805 962 1,843 288 1,555 1989 5,829 - 5,829 1,799 513 360 - 2,672 3,157 963 2,194 245 1,949 1990 6,270 - 6,270 1,834 524 371 - 2,729 3,541 973 2,568 203 2,365

l/ Budget allocation from the Ministry of Finance to cover salaries and other. 1978 includes Col$ 70 million received from DAAC/FAN for salary increase in 1978. Prior to 1978 the Government made small contributions to help cover expenses. In accordance with Law 3, the Government pays all salaries and other expenses starting 1978. 2/ Transfer of 10% of revenues to the Ministry of Finance beginning in 1978. DAAC/FAN has transferred 10% of anticipated revenues Col$ 69 million, based on preliminary projected revenues for 1978 and Col$ 70 million to cover salary increases in 1978. 3/ FAN revenues from operations, plus budgeted funds from the Ministry of Finance, less salaries, other, maintenance and transfer of 10% of revenues Government (1978-1982). to the 4/ Assumes that DAAC/FAN will retain all revenues from operations and pay all working expenses, with no further transfer of 10% of revenues to the Government (1983-1990).

Source: DAAN/FAN - IBRD Mission

August 1978 COLOMBIA

DOMESTIC AVIATION DEVELOPMENTPROJECT

MEDELLIN AIRPORT

Projected Operating Statements (Col.$ Million)

Revenues Working Expenses Transfer to

FAN Revenues Budget from - Bogota Goverrunent Working 3/ Operating Year Ended from Ministry Overhead 10% of 2/ surplus/ Income/ December 31 Operations of Finance Total Salaries Other Maintenance Allocation Revenue Total (Deficit) Depreciation (Loss) 1978 98.1 51.0 149.1 23.0 9.7 10.0 18.3 98 70.8 78.3 17.4 60.9 1979 168.0 62.5 230.5 28.2 11.9 18.0 22.4 16.8 97.3 133.2 17.4 115.8 154.5 1980 214.7 75.2 289.9 33.9 14.3 21.3 27.0 215 118.0 171.9 17.4 1981 265.3 88.1 353.4 39.7 16.8 2823.135 1639.121 03 5 1982 322.6 103.4 426.0 46.6 19.7 2. 71-147 2211255. 1983 4/ 386.8 - 386.8 54.7 23.1 _------443.4-4 43.51.6^ 1647 21450.24.22231 162.5 5906 198 467.5 -467.5 64.1 27.1 43.4 51.0 -185.6 281.9 162.5 119.4 1985 496- 4967. 317 4459.9 -210.2 279.4 162.5 116.9 144.7 1986520.8 - ~~~~~~520.876.7 32.4 43.4 61.1 - 213.6 307.2 162.5 1987 553.28 5.27. 33.0 43.4 62.3 - 217.0 336.2 162.5 173.7 1988 584.6 -584.6 79.8 33.7 43.4 63.5 - 220.4 364.2 162.5 201.7 1989 617.2 -617.2 81.4 34.3 43.4 64.8 - 223.9 393.3 162.5 230.8 1990 65873 2 658.3 83.1 35.0 43.4 66.1 - 227.6 430.7 162.5 268.2

1/ Budget allocation from the Ministry of Finance to cover salaries, other and Bogota overhead. 2/ Transfer of 10% of revenues to Ministry of Finance beginning 1978-1982. 3/ FAN revenues from operations, plus budgeted funds from the Ministry of Finance, less salaries, other, maintenance, Bogota Overhead Allocation, and transfer of 107.of revenues to the Government (1978-1982). 4/ Assumes DAAC/FAN will retain all revenues from operations and pay all working expenses, with no further transfer of 10% of revenues to the Government (1983-1990).

Source: DAAC/FAN-IBRD mission H

August 1978 COLOMBIA

DOMESTIC AVIATION DEVELOPMENTPROJECT

BOGOTAAIRPORT

Projected Operating Statements (Col.$ Million)

Revenues Working Expenses Transfer to FAN Revenues Budget from 1/ Bogota Government Working Operating Year Ended from Ministry Overhead 10% of 2/ Surplus/ Income/ December 31 Operations of Finance Total Salaries Other Maintenance Allocation Revenue Total (Deficit) Depreciation (Loss) 1978 366.8 135.4 502.2 79.1 19.7 40.0 36.6 36.6 212.0 290.2 101.4 188.8 1979 600.5 165.7 766.2 96.8 24.1 74.2 44.8 60.0 299.9 466.3 101.4 364.9 1980 796.9 199.4 996.3 116.5 29.0 87.5 53.9 79.7 366.6 629.7 101.4 528.3 1981 1,027.0 233.9 1,260.9 136.7 34.0 100.6 63.2 102.7 437.2 823.7 64.8 758.9 1982 1,282.7 274.4 1,557.1 160.3 39.9 115.7 74.2 128.3 518.4 1,038.7 117.1 921.6 1983 4/ 1,414.5 - 1,414.5 188.1 46.8 133.0 87.0 - 454.9 959.6 117.1 842.5 1984 1,775.3 _ 1,775.3 220.6 54.9 133.0 102.1 - 510.6 1,264.7 117.1 1,147.6 1985 1 934.6 - 1,934.6 258.8 64.4 133.0 119.7 -- 575.9 1,358.7 117.1 1,241.6 1986 2,059.1 - 2,059.1 263.9 65.7 133.0 122.1 - 584.7 1,474.4 86.4 1,388.0 1987 2,261.1 - 2,261.1 269.2 67.0 133.0 124.6 - 593.8 1,667.3 86.4 1,580.9 1988 2,441.7 - 2,441.7 274.6 68.4 133.0 127.1 - 603.1 1,838.6 86.4 1,752.2 1 1989 2,636.9 - 2,636.9 280.1 69.8 133.0 129.6 - 612.5 2,024.4 86.4 1,938.0 1990 2,850.6 - 2,850.6 285.7 71.2 133.0 132.2 - 622.1 2,228.5 86.4 2,142.1

1/ Budget allocation from the Ministry of Finance to cover salaries, other and Bogota overhead. 2/ Transfer of 10% of revenues to Ministry of Finance beginning 1978-1982. 3/ FAN revenues from operations, plus budgeted funds from the Ministry of Finance, less salaries, other, maintenance, Bogota Overhead Allocation, and transfer of 10% of revenues to the Government (1978-1982). 4/ Assumes DAAC/FAN will retain all revenues from operations and pay all working expenses, with no further transfer of Government. 10% of revenues to the

Source: DAAC/FAN-IBRD mission

August 1978 COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

CARTAGENA AIRPORT

Projected Operating Statements (CoI.$ Million)

Revenues Working Expenses 1' Transfer to FAN Revenues Budget from -' Bogota Government Working 3/ Operating Year Ended from Ministry Overhead 10% of 2/ Surplus/ Income/ December 31 Operations of Finance Total Salaries Other Maintenance Allocation Revenue Total (Deficit) Depreciation (Loss) 1978 41.2 17.1 58.3 8.4 3.1 1.5 5.6 4.1 22.7 35.6 5.7 29.9 1979 70.5 21.0 91.5 10.3 3.8 1.5 6.9 7.1 29.6 61.9 5.7 56.2 1980 99.4 25.2 124.6 12.4 4.6 5.2 8.2 9.9 40.3 84.3 13.4 70.9 1981 127.9 29.6 i57.5 I4.5 -5.4- I2 9.7 -- 12.8 52.6 1o4.9 -- 30.------1982 156.6 34.7 191.3 17.0 6.3 10.2 11.4 15.7 60.6 130.7 30.6 100.1 1983 4/ 178.8 - 178.8 20.0 7.4 10.2 13.3 - 50.9 127.9 30.6 97.3 1984 221.2 - 221.2 23.4 8.6 10.2 15.6 _ 57.8 163.4 30.6 132.8 ------236 ------236 ...... Z 5 ...... 1Q...... IQ_ ...... 3 _ ...... _. 66.1 170.6 0.6 140.0 157.7 1986 255.1 - 255.1 28.0 10.3 10.2 18.7 67.2 187.9 30.2 1987 276.6 _ 276.6 28.6 10.6 10.2 19.1 _ 68.5 208.1 30.2 177.9 1988 298.8 - 298.8 29.2 10.8 10.2 19.4 _ 69.6 229.2 30.2 199.0 1989 323.6 - 323.6 29.7 11.0 10.2 19.8 _ 70.7 252.9 30.2 222.7 1990 352.4 _ 352.4 30.3 11.2 10.2 N0.2 - 71.9 280.5 22.5 258.0

1/ Budget allocation from the Ministry of Finance to cover salaries, other and Bogota overhead. 2/ Transfer of 10% of revenues to Ministry of Finance beginning 1978-1982. 3/ FAN revenues from operations, plus budgeted funds from the Ministry of Finance, less salaries, other, maintenance, Bogota Overhead Allocation, and transfer of 107%of revenues to the Government (1978-1982). 4/ Assumes DAAC/FAN will retain all revenues from operations and pay all working expenses, with no further transfer of 10% of revenues to the Government.

Source: DAAC/FAN-IBRD mission

August 1978

00 COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

DAAC/FAN ProjectedCash Flow (Col.$Millions)

Source of Funds Tota Application of Funds Total Annual Cummulative Year Ended Working - Other World Cash Capital World Bank Other External Debt Internal Debt Cash Cash Cash December 31 Surplus Sources Bank Available Investments Principal Interest Principal Interest Principal Interest Required Surplus Balance 1978 673 131 2/ - 804.0 533.0 - - 104.0 92.3 23.4 32.1 784.8 19.2 172.5 6/ 1979 1,153 615 3/ 289.4 2,057.4 1,883.0 - 23.4 151.3 109.5 29.6 29.1 2,225.9 (168.5) 4.0 1980 1,498 168 4/ 855.4 ______2,521.4 1,646.8 - 82.9 222.3 151.4 23.9 26.6 2,153.9 367.5 371.5 ______._…______.______-_____ 1981 1,918 - 819.7 2,737.7 1,986.1 - 148.8 292.9 147.7 18.3 25.5 2,619.3 118.4 489.9 1982 2,398 - 1,086.9 3,484.9 2,141.0 - 238.0 319.2 132.8 18.5 25.0 2,874.5 610.4 1,100.3 1983 1,504 1,025 5/ 575.1 3,104.1 1,068.5 354.1 319.8 350.7 114.8 12.1 24.3 2,244.3 859.8 1,960.1 1984 2,006 - 267.3 2,273.3 916.0 389.5 342.7 306.7 102.0 - - 2,056.9 216.4 2,176.5 1985 _ __ _1.975 - - 1,975.0 1,054-0 428.5 347.8 215.7 84.0 ------____ …___-______-__ ------______-- - 2,130.0_------(155.0)______2,021.5 1986 2,257 - - 2,257.0 1,054.0 428.5 313.1 229.5 67.8 - 2,092.9 1987 2,506 - 164.1 2,185.6 - - 2,506.0 2,193.0 428.5 279.3 119.7 51.0 - - 3,071.5 (565.5) 1,620.1 , 1988 2,805 - - 2,805.0 1,054.0 428.5 245.6 119.7 42.5 - - 1,890.3 914.7 2,534.8 1989 3,157 - - 3,157.0 1,054.0 428.5 211.6 119.7 33.8 - - 1,847.6 1,309.4 3,844.2 1990 3,541 - - 3,541.0 1.054.0 428.5 177.8 83J8 25.3 - _ 1.769.4 1,771.6 5,615.8 27,391 1,939 3.893.8- 33,223.8 17,637.4 3,314.6 2,730.8 2,635.2 1.154.9 125.8 162.6 27.761.3 5.462.5

1/ From Table 6.5. 2/ Includes Col$ 45 million surplus from operationsand Col$ 86 million from the Ministry of Finance for investment. 3/ Bilateral agreementwith the Government of France to be repaid by the Governmentof Colombia, Col$ 450 million and FAN External Loan for cash requirements,Col$ 165 million, 5 years, including 1 year grace at interest rate of 8% p.a. 4/ External Loan for acquisition of Crash Fire and Rescue Equipment. 5/ Sale of land at present Medellin airport. 6/ Assumes that DAAC/FAN will retain Col$ 153.3 million to cover two months working expenses for 1979 and the balance of year 1977 cash will be used to pay for previous investments contractedat Barranquilla,Cartagena and other airports, plus completion of installation of navigationalaids. 7/ Total amount of disbursementsvaries from table in para. 4.04 due to the effect of devaluation on disbursementswhich come after completion of works.

Source: IBRD mission

August 1978 COLOMBIA

DOMESTICAVIATION DEVELOPMENTPROJECT

DAAC/FAN

Projected Balance Sheets as of Deceniber31 (Col.$ Million)

1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Assets

Current Assets

Cash I 172.5 4.0 371.5 489.9 1,100.3 1,960.1 2,176.5 2,021.5 2,185.6 1,620.1 2,534.8 3,844.2 5,615.8 Receivables 220.3 322.3 422.3 539.3 667.5 718.0 771.3 1,093,8 1,176.8 1,454.3 1,558.8 1,675.5 1,802.8 Inventories 180.4 216.0 256.0 293.8 338.0 388.8 447.1 514.1 514.1 514.1 514.1 514.1 514.1

Total Current Assets 573.2 542.3 1,049.8 1,323.0 2,105.6 3,066.9 3,394.9 3,629.4 3,876.5 3,588.5 4,607.7 6,033.8 7,932.7

Fixed Assets - Gross 3,841.5 4,904.8 6,253.0 7,416.5 8,949.8 12,610.2 13,526.2 14,580.2 15,634.2 17,827.2 18,881.2 19,935.2 20,915.5 AccumulatedDepreciation 817.1 1,180.1 1,627.3 2.113.3 2,764.1 3,625.3 4,532.0 5,491.5 6,503.6 7,673.6 8,635.4 9,598.8 10,572.2

Net Fixed Assets in Use 3,024.4 3,724.7 4,625.7 5,303.2 6,185.7 8,984.9 8,994.2 9,088.7 9,130.6 10,153.6 10,245.8 10,336.4 10,343.3 Constructionin Progress 358.4 899.4 1,129.0 1,400.5 1,405.9 619.1 916.0 1,054.0 1,054.0 1,054.0 1,054.0 1,054.0 1,054.0

3,382.8 4,624.1 5,754.7 6,703.7 7,591.6 9,604.0 9,910.2 10,142.7 10,184.6 11,207.6 11,299.8 11,390.4 11,397.3

2 Total Assets 3,956.0 5,166.4 6,804.5 8,026.7 92697.2 12,670.9 132305.1 13,772.1 14,061.1 14,796.1 15,907.5 17,424. 19,330.0

Liabilities

Current Liabilities 180.5 230.0 279.8 324.0 376.0 448.8 518.8 600.0 612.5 638.3 654.3 668.0 682.3

Long Term Debt

World BsankLoan - 224.0 1,120.2 2,010.6 3,304.0 3,991.3 3,999.8 3,969.8 3,539.9 3,110.0 2,680.0 2,250.1 1,820.2 Other External Debt 1,536.9 1,805.9 1,798.9 1,722.7 1,576.2 1,383.2 1,214.9 1,120.7 891.2 771.4 651.7 531.9 448.1 Internal Debt 126.9 107.7 85.5 61.8 28.1 ------

Total Debt 1,663.8 2,137.6 3,004.6 3,795.1 4,908.3 5,374.5 5,214.7 5,090.5 4,431.1 3,881.4 3,331.7 2,782.0 2,268.3

Total Liabilities and Debt 1,844.3 2,367.6 3,284.4 4,119.1 5,284.3 5,823.3 5,733.5 5,690.5 5,043.6 4,519.7 3,986.0 3,450.0 2,950.6

Goverrnent Equity and Reserves 2,111.7 2,798.8 3,520.1 3,907.6 4,412.9 6,847.6 7,571.6 8,081.6 9,017.5 10,276.4 11,921.5 13,974.2 16,379.4

Total Liabilities 3,956.0 5,166.4 6,804.5 8,026.7 9,697.2 12,670.9 13,305.1 113372.1 14,061.1 14,796.1 15,907.5 17,424.2 19,330.0

1/ Table 6.9

Source: IBRD Mission o

August 1978 ANNEX 1 Page 1 -76-

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Outline Advisor Job Descriptions

1. Air Traffic Control Advisor

The Air Traffic Control Advisor shall:

a) Review existing air traffic control rules and regulationsand recommend changes necessitatedby the introductionof modern jets and wide-bodied aircraft;

b) Review the existing and new air traffic controlrulesand regulations and recommend any necessary procedures to ensure that they are properly promulgatedand applied;

c) Review the capabilitiesof the various pilots in the existing fleets and recommend the degree of sophisticationof navaids and procedures suitable for their stage of development;

d) Review all existing instrument procedures and recommend changes as indicatedby introductionof new navaids or airports or changes in airport or navaid location; and

e) Review the techniquesof the existing controllersand communica- tors and recommend upgrade training as indicated.

2. Electronic Engineering Advisor

The Advisor shall assist in:

a) Ensuring that the level of standard approved for the various facilities is properly implemented and the radio navaids systems are maintainedso that the safe operation of aircraft is guaranteed;

b) Ensuring that the operation of the equipment and facilities for which the Department is responsibleIs continually monitored and periodicallyevaluated;

c) Ensuring that systems for recording adjustments,operating reports and flight test reports are systematicallyanalyzed and evaluated; and shall: ANNEX 1 Page 2

-77-

d) Review the preparation and implementation of the rules and regulations necessary for the proper maintenance and conser- vation of radio navaid equipment, installations and components and recommend necessary changes;

e) Review the preparation of technical instructions and publications and recommend changes for their optimum use by the facilities installed and/or maintained;

f) Review the Department's coordination activities with the Air Traffic Control Department, regional airport managers and companies operating aircraft in order to provide the assistance required to improve service;

g) Review the monitoring procedures for all pertinent frequencies and recommend the use of specific frequencies for aeronautical radio navaid services in accordance with the regulations; and

h) Study and make recommendations on requirements for specialized personnel.

3. Spares Procurement and Warehousing Advisor

The Advisor to the Procurement Section shall:

a) Review the existing procedures for procuring electronic and other spares for the operations of DAAC and make any indicated recommendations for changes in these procedures which would improve them;

b) Review the time and the correctness of shipments for provision of spares to the various facilities and make recommendations for changes in warehousing and shipping procedures to ensure that subsequent spares replacement for facilities will be more res- ponsive to the needs of DAAC; and

c:) Prepare a training schedule for upgrade training of procurement and warehousing personnel.

4. Airport and Terminal Building Management Advisor

The Advisor shall:

a) Review all existing regulations pertaining to the management of airports and terminal buildings and prepare necessary recommended changes or new management manuals or operational regulations;

b) Review all existing concessionaire and airline leasing con- tracts in association with the Accounting Advisor and jointly prepare new contracts to encompass modem airport leasing principles; ANNEX 1 Page 3

-78-

c) Review existing airport user committees and recommend indicatedchanges in their structure and/or operations, or assist in their formation and identificationof their subsequent responsibilitiesif such committeesare found not to exist;

d) Review the existing aircraft marshalling and airport operations officers and the systems and regulations under which they work and recommend any indicated changes,specificallykeeping in mind aeronauticalemergency situations; and

e) Prepare personnel training schedules as appropriate.

5. Accounting Advisor

The Accounting Advisor shall assist in:

a) Ensuring that the financial records are kept in accordance with regulationsas establishedby the Governmentand in a manner compatiblewith generally accepted accounting prin- ciples and that they include the records of DAAC Headquarters, Regional Offices, Airports and enroute stations managed by DAACby Location and Cost Center;

b) Ensuring that recommendationsare presented to management for the setting of structure and level of tariffs, as may be required, in accordancewith a review of cost data in (a) above;

c) Ensuring that monthly financial status reports of investment undertakenby DAAC by Location and Cost Center are prepared;

d) Ensuring developmentof manpower, operating and capital budgets by Location and Cost Center annually displayed by month for the operatingyear, and also the preparationof annual budgets for a projected period of five years;

e) Ensuring that accounting data are provided for planning and decision-makingpurposes;

g) Directing the taking of inventory for general balance sheet purposes and ensuring that the general balance sheet is pro- perly prepared;

h) Ensuring that operating and other expenditures are centralized on the basis of a cost accounting plan and the program's budget;

i) Ensuring that summary accounts to be sent to debtors are prepared and summary accounts sent by creditors are checked; ANNEX 1 Page 4

-79-

j) Ensuring that year-end adjustments or corrections for the accurate determination of the Institution's financial, economic and assets situation are made;

k) Ensuring that vouchers used for the recording of transactions are properly filled; and

1) Reviewing with the Airport Operations Advisor the existing concessionaire and airline leasing contracts and jointly preparing new contracts to encompass modern airport leasing principles.

6. Advisor to Director, DAAC Planning Department

Eunctions

The advisor to the Director of the Planning Department shall aISSiSt in:

a) The formulation and implementation of measures and practices in economic and financial evaluation designed to improve planning for the aviation system; and shall

b) Prepare a plan for formal training of staff of the Planning Department in relevant specialist techniques and conduct on-the-job training as required;

z) Review the adequacy of the existing traffic statistics system, in terms of both coverage and timeliness, for both planning and monitoring other DAAC activities (e.g. revenue collection);

d) Review the techniques of the Department personnel in:

(i) air traffic forecasting;

(ii) financial and economic evaluation of infrastructure proposals, including ongoing maintenance;

(iii) airline fleet purchase and plans including their effects on traffic and airport requirements;

(iv) monitoring the effects on system costs and user charges of ongoing and planned infrastructure investments;

e) Review the practices and guidelines for setting air fares and freight rates consistent with both the use of publicly provided facilities and the provision for future traffic growth; ANNEX 1 Page 5

-80-

f) Review the desirabilityof establishinga rolling five-year investmentprogram for infrastructurerequirements, including appropriatemonitoring and review practices; and

g) Prepare a report on each of the above aspects, recommend any changes in staff required, and assist in implementations following the review, including as appropriate the preparation of an investmentprogram.

April 1978 -81- ANNEX 2 Page 1 COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

Training

TOTAL TRAINING REQUIREMENTS Specifications 1976 1977 1978 1979 1980 1981 Total

Communications Cperations 49 46 16 5 11 15 142 COM & Electronic.s 61 55 35 48 43 45 287 Maintenance

Airport Traffic Control 73 95 68 50 54 51 391 Meteorology 25 6 6 1 2 1 41 Aeronautical Information 20 15 4 4 2 4 49 Airports Administration and 104 32 2 4 2 2 146 Operations Airport Maintenance 13 11 10 11 5 13 63 Fire Crash and Rlescue 17 11 13 15 15 15 86

Search and Rescue (SAR) 4 - - - - - 4

Air Navigation 2 - 2 - 2 - 6

Personnel Licensing 6 - 2 2 - 3 13 Flight Operations 1 - 1 1 - - 3 Instruction 18 - 1 - - 19 Miscellaneous 2 - - - - - 2 Accident Investigation 2 - - 3 1 3 9

397 271 160 144 137 152 1261

Pilots

Aircraft maintenance ------

Source: ICAO :1975 Study

August 1978 -82- ANNEX 2 Page 2 TOTAL REQUIREMENTS FOR TRAINING BY SPECIALTIES Available M.P. Required M.P. Training Abbreviation Especification 1976 1981 Requirements

ASO Aeronautical Station Operator 81 119 80 ASO RT Radio Telephony Rating - - - ASO WT Radio Telegraphy Rating - - - ASO TT Teletypewriter Rating 48 63 43 ATC Air Traffic Controller - - - ATC TWR Airports Control Rating 117 220 130 ATC APP Approach Control Rating 35 90 83 ATC ACC Area Control Rating - - - ATC RDR Radar Rating 10 120 112 FOO Chief of Flight Operations - - - AIS Aeronautical Information Officer 2 41 49 AIS BRF AIS - Briefing - - - AIS MAP AIS - Charts - - - AIS PUB AIS - Publications - - - MET Aeronautical Meteorological Officer - - - MET ASS Assistant Meteorological Officer - - - MET BRF Briefing and Documentation - - - MET FOR Forecaster 3 3 3 MET OBS Meteorological Observations and Reports 15 50 35 MET MET - Meteorological Instruments 2 3 3 COM Aeronautical Communications Officer 5 5 - COM AUT Data Processing Equipment - -

COM OPS Communications Operations - COM ACT Message Checking and Accounting - - - COM SUP Supervisor of Telecommunica- tions Services 8 16 19 AGA ENG Airport Engineer 10 12 2 AGA MGT Airport Manager 5 119 146 PCA MGT Chief of Airport Operations - oPS -83- ANNEX 3

COLOMBIA

DOMESTIC AVIATION DEVELOPMENT PROJECT

DAAC/FAN

Schedule of Selected Financial Indicators

Operating Ratio Annual Return on Medellin Bogota Cartagena Debt Service Net Fixed Assets Airport 1/ Airport 1/ Airport 1/ DAAC/FAN 2/ Coverage 3/ in Use DAAC/FAN 4/

1976 - - - 88 - 4.8 1977 - - - 79 - 12.1 1978 79 75 58 116 1.9 Neg. 1979 58 56 40 90 2.2 3.8 1980 53 48 44 85 2.3 6.5 1981 46 38 55 76 2.6 10.7 1982 43 39 48 75 2.0 12.3 1983 84 40 45 80 1.3 8.4 1984 74 35 39 73 1.8 12.2 1985 76 35 40 76 1.9 11.2 1986 72 32 38 73 2.5 13.6 1987 68 30 35 73 2.9 14.0 1988 65 28 33 66 3.5 18.0 1989 62 26 31 62 3.5 21.3 1990 59 24 26 59 5.2 24.7

1/ The total of salaries, other, maintenance, Bogota overhead allocation and depreciation divided by FAN revenues only. Excludes 10% transfer to the Government.

2/ The total of salaries, other, maintenance and depreciation divided by FAN revenues only.

3/ Working surplus of the current year divided by the debt service of the following year. Years 1978-1982 include funds received from the National Government.

4/ FAN revenues only less salaries, other, maintenance and depreciation divided by average net fixed assets.

Source: IBRD mission

August 1978 -84- ANNEX 4 Page 1

COLOMBIA

DOMESTIC AVIATION DEVELOPMENTPROJECT

FinancialAssumptions

1. Revenues:

a) All revenueshave been increasedby traffic growth at tariffs held constant in real terms at their 1977 year end level to reflect inflationin the years 1978 through 1983. Adjustmentshave been made based on estimatesdeveloped by the Country Economist of the Bank.I'

b) It is estimatedthat 20% of Domestic PassengerTax and 10% of InternationalPassenger Tax is not collected. In 1979 it is assumed that these revenueswill be collectedfrom all passengers.

2. Expenses:

a) Salaries and other category of expenses: increasedat 2% per year to allow for increasedrequirements resultingfrom greater traffic.

1) It is assumed that the Governmentwill not allow any loss in real terms for salaries. Salaries and other category of expenseshave b,eenincreased by the estimated effect of price increases.!A provisionhas already been made for salary increasesin 1978 of 20%, and the budgeted amount for miscellaneousexpenses is fixed by budget.

b) Maintenance

1) Civil works after 1979 - 1% of Replacementcost per year.

2) Aviation,ground maintenanceequipment, fire fighting equip- ment and FFI aircraft - 5% of replacementcost per year.

3) In 1978 the budgeted expense.

c) Depreciationemployed is in accordancewith the depreciationpolicy establishedby the Government.

1) Civil works (runways,buildings, access roads, fences) - 5% commencingwhen the facilitiesare expected to be in use.

2) Aviation equipment (communications,navigational aids, lights, ground maintenanceequipment) - 10% commencingwhen the equip- ment is received in use. -85- ANNEX 4 Page 2

3) FFI aircraft - 12.5% commencingwhen the equipment is received in use, with 20% residual value.

4) Assets already in use have been depreciatedin the following manner:

- Civil works - 10% of net fixed in use - Aviation equipment - 20% of net fixed in use

3. Sale of Land at Medellin Airport

Increasedfrom 1977 prices of pesos 384 million by the estimate rate of price increase in the same manner as salaries. 1/ 4. World Bank Disbursements

The estimatedeffect of devaluationof the peso has been applied to disbursementsbased on estimatesdeveloped by the country Economistof the Bank. 1/

5. Investment

a) The project items have been escalatedfor foreign and local componentsin accordancewith guidelinesestablished by the Bank. 1/

b) The foreigncomponents of the project have been treated for devaluationin the same manner as World Bank Disbursements._/

c) It is assumed that the nonprojectitems will be primarily accomplishedby Colombianfirms. They have been escalated in accordancewith the guidelinesestablished for Colombia (local)by the Bank, and held constant from 1986-1990.1/ 6. Debt Service

The estimatedeffect of devaluationof the peso, as established by the Bank, has been applied to the principaland interest of the Bank loan and other external debt, and held constant from 1986-1990. 1/

1/ Assurmptionsfor local price increasesand the estimatedeffect of devaluationof the peso are containedin C.4. of the Project File.

September1978 -86- ANNEX 5 *Page 1

COLOMBIA

DOMESTIC AVIATION DEVELOPMENTPROJECT

Selected Documents & Data Available in the Project File

A. Sector Reports and Studies

A.1. Informe al Congresso 1977, Carlos Sanz de Santa Maria, Departamento Administrativode AeronauticaCivil, Fondo AeronauticaNacional, July 1977.

A.2. Ley 3a de 1977, El Congreso de Colombia, Enero 21, 1977.

A.3. Bases para un Plan de Desarrollo de la Orinoguia, Departamento Administrativode Intendenciasy Comisarias,Bogota, June 1977.

A.4. Solucitudde Credito externo al Gobierno del Japon para las Intendencias y Comisarias,Departamento Administrativo de Intendenciasy Comisarias, DepartamentoNacional de Planeacion,Bogota, January 1977.

A.5. Colombia-Politicasdel Sector Turismo, CorporacionNacional de Turismo, Bogota, 1978.

B. Reports & Studies Relating to the Project

B.1. Aeropuerto de Medellin, Rionegro, Estudio de FactibilidadEconomica y Financiera,Compania de Estudios e InterventoriasLtda, prepared for DepartamentoAdministrativo de Aeronautica Civil, 3 vols, final report, January 1978.

B.2. Estudios del Aeropuerto de Medellin, Rionegro, Informe Tecnico No. 1, Analisis de la Demanda Aereo, Compania de Estudios y Interventorias et al, prepared for DepartamentoAdministrativo de Aeronautica Civil Fondo AeronauticoNacional, March 1975 (to be read in conjunction with B.1.).

B.3. Estudio Economico y Operacionaldel Trafico Aereo, Capitula III, Sofreavia, prepared for DepartamentoAdministrativo de Aeronautica Civil, 1972 (to be read in conjunctionwith B.1.).

B.4. Estudio de FactibilidadEconomica y Financiera para la Construccion de una Nueva Pista en el Aeropuerto Internacionalde Eldorado en la Ciudad de Bogota, Restrepo y Uribe Ltda, prepared for Departamento Administrativode AeronauticaCivil, Fondo Aeronautico Nacional, final report, January 1978.

B.5. Estudio de FactibilidadEconomica y Financiera de las Obras de Ampliacion del Aeropuerto de Crespo en la Ciudad de Cartagena, Restrepo y Uribe Ltda, prepared for DepartamentoAdministrativo de Aeronautica Civil, Fondo AeronauticoNacional, final report, January 1978. ANNEX 5 -87- Page 2

B.6. Av:ionLaboratorio para Calibracionde Radioayudas,Estudio de Factibilidad,Fondo AeronauticoNacional, Division Ingenieria Electricay Electronica,February 1978.

B.7. Avianca, Operacion con Aviones de Cabina Ensanchada,Aeropuerto Eldorado, Primera Parte, Terminal de Passajeros,Drews y Gomez Ltia.

C. Working Papers

C.l. AeronauticalInformation Publication, Colombia-selected excerpts,- DepartamentoAdministrativo de AeronauticaCivil, June 1972.

C.2. Passenger, Freight and Aircraft Traffic at Major Airports, 1971- 1975 and Forecasts to 1980, DepartamentoAdimiinistrativo de Aeronautica Civil, January 1977.

C.3. Pa.sajerosTransportados en la PrincipalesRutas del Pais 1963-1975, DepartamentoAdministrativo de AeronauticaCivil, January 1977.

C.4 Estimatedprice increasesand the effect of devaluationon the peso.

August 1L978

COLOMBIA DOMESTIC AVIATION DEVELOPMENTPROJECT At] DEPARTAMENTOADMINISTRATIVO DE AERONAUTICA CIVIL ORGANIZATION CHART ------1 _ _ _ ~~~~~______FL _ YDO______

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.COORDINATINCOMMITTEE SECRETARY GENEA RNLI

DIRECTORGENERNAL DOF AERNAUTICAL OTDIELECOMEAN DIRECTOR GENERAL NERAL OF AIR OPERATIONS INSTALLAT IONS AIDS TO AIR NAVIGATION OF FINANCE OF ADMINISTRATION

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1ONE -2 -E [:ION 4

EARRANDUI AL T |BSOGO A l l MEOELLIN | | EARRtNOUILLAS | CALI l l CtJCUTA X § VILLAVICENCIO- | COLOMBIA DOMESTIC AVIATION DEVELOPMENT PROJECT Implementation Schedule

Sept. Dec. March June Sept Dec. March Junoc Sept. DecC. MErch JuLnfe Sept. Dec. Marcl. June Seot, Dec. 78 78 79 79 79 79 80 80 80 80 81 81 81 81 82 82 82 82

Cartage na I Aproul Auto Park rig & Access Roadt R/VV Extensio_i R/W Strengthenings Or, elage Liglhti nrg Electric Plant CFR Buirfing Navaids & Cor-ti. Bogota Apron Strengthening T/VV Strengthening Initial Aproni Widening StrengthenIng TNW Connections Pave R/Vv Shoulders Internatioval Apron Pave TAWShoulders Apron Drainage Donrestic Apron T/W Lead-offs Cargo Apron Strengthening Apron Lightingt Access Roadc Parking Lot Cargo Terminal International Terminal Domestic Terminal 1i Navaids Medellin Land Acquisition Earth Moving Airport Paving Drainage Access Road Public Services High Tension Line Relocation Terminal Building T.B. Furniture, Etc. Cargo Building CFR Build ng Special Systems Equipment Special Systems Installation Lighting, Navaids, Etc. Equipment Lighting, Navaids, Etc. Installation CFR Equipmenti Tech. Assistance I Training UNDP (FALPRO) Financial Consuttant | Master Plan Consultant FFI Aircraft Eicctron,cs Spar,os I

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