Govt working on regional aviation plan

Mumbai: India’s new civil aviation policy in the works will seek to tap a potential 300 million middle-class citizens living in smaller towns and cities, by encouraging low-cost airports and regional airlines that service such airports, top government officials indicated. The dividend: a ten-fold jump in India’s air traffic.

No direct subsidies are on the cards, though, but the government may put in place incentives to improve the commercial viability of such airlines and airports.

Smaller and sparsely populated towns and cities are generally unattractive for large airlines connecting metros and big cities, since such flights call for smaller aircraft and earn less revenue.

“There are around 400 airports in the country, and only 70 (of them) are actually utilized. If we can leverage these unutilized airports through regional airlines, it is a huge growth opportunity,” said R.N. Choubey, secretary, ministry of civil aviation.

Even though some countries do subsidize regional aviation, India has no such plans.

“There are certain limitations for the government on offering a direct subsidy,” said Choubey, adding that his ministry is working out an alternative, without spelling out details.

At present, 65% of India’s air traffic comes from six metros.

India has less than 50 runways where aircraft such as a Boeing 737 or an Airbus A320 can land.

“Traffic from metros has led to a growth of 10-14%. But the time has come to tap the traffic in tier II and III cities, where there is a middle-class of 300 million.

Even if these 300 million take two trips a year, it is 600 million passengers against the current 70 million passengers, an almost ten-fold increase,” Choubey said.

He hinted the government is looking at a 20-25% growth, considering the huge middle-class population.

“This looks ambitious. But it is entirely and eminently possible,” Choubey added.

G. Asok Kumar, joint secretary with the civil aviation ministry, said the new aviation policy will also encourage development of smaller, no-frills airports that can handle smaller, 70-seater planes. Kumar said these planes can feed into bigger airlines in the city. “Ideally, India should have about 200-300 airports considering the middle-class population. We would like to have smaller airports with lower cost of operations,” he said.

Kumar also hinted at cross-subsidizing operations at no-frill airports by allowing the airport operator to use the airport real estate for commercial purposes.

According to the state-run Airports Authority of India (AAI), about 50 no-frills airports are under development. Out of them five airports included in the first phase are Teju in Arunachal Pradesh, Jharsuguda in Odisha, Hubli and Belgaum in Karnataka and Kishangarh in Rajasthan.

No-frills airports are those with basic infrastructure to handle aircraft.

In June, AAI opened the Kadapa airport in Andhra Pradesh. The new tier III airport, built at a cost of Rs.42 crore, has a compact prefabricated terminal building and can handle 100 peak-hour passengers at a time.

Its apron can accommodate three 70-seater, ATR-72 aircraft.

Bengaluru-based regional airline Air Pegasus is flying out of this airport.

In August 2007, the aviation ministry introduced scheduled operator permits for regional airlines. These airlines must fly to airports in one of the five designated regions: north, south, west, east and the northeast.

Except those licensed to fly in the south, these airlines are not allowed to connect to more than one major city.

However, the history of India’s regional aviation is littered with failed airlines.

In April 2013, seven months after it started operations, Religare Voyages Ltd shut its regional airline Air Mantra, citing poor bookings. MDLR Airlines Pvt. Ltd stopped flying on 1 October 2009. Several others, including Star Aviation Pvt. Ltd, ZAV Airways Pvt. Ltd, Jagson Airlines Ltd and King Air Pvt. Ltd, licensed to fly as regional airlines, failed to start operations because of high jet-fuel prices and the economic slowdown of 2008.

In the case of Paramount Airways Pvt. Ltd, a scheduled airline that had a substantial southern focus, operations were suspended after aviation regulator cancelled its licence when it fell short of the minimum requirement of five aircraft.

“The next wave of growth will come from regional aviation. Even if 10% of the 300 million middle-class population living outside of metro cities starts flying, it is a huge growth for Indian civil aviation,” said Ankur Bhatia, executive director, Bird Group, a travel and aviation firm.

When asked about grounded regional airlines, Bhatia said that Air Mantra and MDLR had the wrong type of aircraft for regional operations. “For successful regional airline operations, you need to have the right type of aircraft and focus. A big, scheduled airline operating larger planes cannot focus on regional operations with smaller planes. Nowhere in the world has such a model worked,” Bhatia said.

He said India’s first low-fare airline, Air Deccan, had successfully run regional operations with ATR planes.

SpiceJet Ltd, India’s second largest low-fare airline, has experimented with the smaller planes for regional operations, apart from larger planes to connect larger cities, and ran into serious trouble with operations and finances.

“If India fulfils its promises on the regional aviation plan, the country will have a couple of 100 ATR planes,” said Patrick de Castelbajac, chief executive officer at ATR.

The Toulouse, France-based turboprop aircraft manufacturer ATR is the world leader in the market for aircraft with up to 90 seats and has 30 aircraft flying in India.

Castelbajac said the current government is committed to encouraging regional aviation and said that he’s confident it will resolve all issues. He said 75% of ATR aircraft in India fly point-to-point while the remaining feed into larger airlines.

Castelbajac said ATR is in talks with multiple potential Indian airlines, including regional airlines.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.