The Narendra Modi government is laying emphasis on enhancing regional connectivity and in accordance with this decision, the government has decided to open 50 ‘no-frills’ airports in regional locations. The mission of the Ministry of Civil Aviation is to create world-class infrastructural facilities; establish regulatory framework in consonance with international standards; connect presently un-served or underserved areas; develop skilled manpower and deploy advanced technologies. All these are happening concurrently at the moment.

DRAFT POLICY

The Union Civil Aviation Minister Ashok Gajapathi Raju said: “While the government would facilitate opening of more regional airports with and without private sector participation, it was important for airlines to start operating to remote locations”. A draft policy proposes to increase trunk routes from 12 to 30 and 87 regional incentive destinations. The ministry has asked for airlines to mount capacity of at least the same capacity as trunk routes to regional destinations by October 2015, a policy which the private operators are not in favour of.

The government had issued a list of ‘incentive destinations’ including Jammu and Kashmir, Andaman and Nicobar Islands and the North-eastern regions.“Equal capacity deployment on regional and remote routes vis-à-vis trunk routes, may not be commercially viable,” agencies have quoted low-cost carrier GoAir as saying.

NO-FRILLS AIRPORTS

Meanwhile, the Airports Authority of India (AAI) has announced that it would build five no-frills airports in underserviced areas. The five no-frills airports shortlisted from 50 cities are Teju in Arunachal Pradesh; Jharsuguda in Odisha; Krishnanagar in Rajasthan and Hubli and Belgaum in Karnataka. The proposal is to build these airports within 100 crore (estimated between 55 crore and 85 crore) as against 2,500 crore needed for constructing state-of-the art international airports. The no-frills airports will be built in the form of modules allowing extension of buildings as and when there is a requirement.

On completion of the NDA Government’s first 100 days in power, the Minister of Civil Aviation said, ‘The AAI has developed a model for these no-frills airports which will provide essential services needed to operationalise the airports without compromising safety and security. This will result in lower cost of operation and make it viable for airlines with smaller aircraft to run their services.” In a presentation to the Prime Minister, the Minister had indicated the plans to develop 50 no-frills airports across the country. The greenfield airports which are under development include Navi Mumbai, Juhu, Goa, Kannur, Pune, Sriperumbudur, Bellary and Raigarh.

When functional, these airports will have short airstrips fit for operations by aircraft such as ATR and Bombardier Q400; no conveyor belts and no aero-bridges. Only the security hold areas at these airports will be air-conditioned.

In order to enhance pan-India connectivity, in the Twelfth Five Year Plan ending March 31, 2017, the government had earmarked 1,500 crore for development of non-metro airports. While airport development in Tier-II and Tier-III cities are on the anvil, the government has also liberalised policies to encourage regional airlines to start operations. Air India Regional and Air Costa are the only two regional airlines operating presently, though a couple have applied for air operators certificates. The applicants include Air Pegasus and EasyFly, both based out of Bengaluru. With airports and regional airlines coming up though with some delay, it is expected that these will boost Indian economy, providing the badly needed to the air cargo and MRO segments of the industry.

At present, majority of the airports are managed by the AAI as the private sector has not found the business viable as yet. Presently, AAI handles over 122 million domestic and 47 million international passengers and it is expected that the numbers would touch 217 million domestic and 76 million international passengers by 2020, not to forget air cargo movement.

PPP MODEL IS THE WAY FORWARD

The Minister for Finance Arun Jaitley, while presenting the union budget, reiterated the government’s decision to develop new airports to encourage air travel in the country. He said that the AAI would build these airports through public-private partnership (PPP) route. Jaitely said that while air travel had increased, it is still a dream of many Indians to fly. Non-metro airports in the country now account for only about 30 per cent of the total air traffic but this is expected to rise to 45 per cent in the next few years. The plan is to build 200 low-cost airports in the next 20 years to connect Tier-II and Tier-III cities. The government has finished development work at 33 non-metro airports for increasing regional connectivity.

The government also plans to construct 15 additional airports under the greenfield airport policy by identifying the most suitable low-cost viable model.

The low-cost carriers, though some of them have floundered in the recent past, have really opened up the aviation sector in India. It has increased the movement of people from smaller towns while helping the airlines to operate from airports with lower costs. Low-cost airports due to low operational investments will help airlines manage their business which at present is going through turbulent times. Industry watchers have said that high operating cost of airlines has left many an airline in the red. There is clearly and urgency to develop low-cost airports.

SUGGESTIONS BY ASSOCIATIONS

Sidharth Birla, President of the Federation of Indian Chambers of Commerce and Industry (FICCI), said, “In view of the enormous growth prospects of air traffic and substantial investment projections, Indian aviation market offers significant long-term opportunities for global aviation players. The government and industry are already working together closely. I am confident, this partnership will be further strengthened and play a critical role in improving regional connectivity and promoting sustainable development of the civil aviation sector in the country.”

A FICCI-KPMG report notes that the next generation of aviation growth in India will be triggered by regional airports. At present, there are around 450 used/un-used/abandoned airports and airstrips spread all over the country. Many Indian states, especially in Eastern India, have started taking proactive measures to promote air connectivity. These initiatives include reduction in sales tax on aviation turbine fuel, development of no-frills airports, promotion of aviation academies and supportive policies for airlines and tourism. West Bengal deserves a special mention as it is the first large state in the country to declare zero per cent sales tax on ATF at its regional airports and 15 per cent sales tax on ATF used by additional flights started at its metro airport in Kolkata. A lot more needs to be done, as several Tier-II/Tier-III cities are still unconnected or underserved. These involve relaxation on regulations, revising the security requirements, allowing domestic code sharing, providing free or discounted utilities and connecting infrastructure. The proposed Essential Air Services Fund by the Ministry of Civil Aviation needs to be set up immediately. All this will have a multiplier effect in terms of higher growth of local economic activities, tourism and employment.

Another report by ASSOCHAM and Yes Bank has made several recommendations and they include:

• Encouraging private sector participation through PPP models.
• Emphasis on ‘Aerotropolis’ model to enhance revenues, especially non-aeronautical.
• Developing around 20 airports in Tier-II and Tier-III cities and spending $1.3 billion on non-metro airport projects over the next five years.
• Restructuring route dispersal guidelines such that routes with high and medium passenger load factor subsidise each other and routes with low PLF be supported by establishing a regional air connectivity fund.

India has the potential to become the third largest aviation market by 2020 and the largest by 2030. The Indian civil aviation industry is amongst the top ten in the world with a size of around $16 billion. This is a fraction of what it can actually achieve. There is large untapped potential for growth due to the fact that access to aviation is still a dream for nearly 98 per cent of its population.