AAI is now embarked upon improving its marketing efforts

Upgradation of 58 airports in Tier II and Tier III cities, currently embarked upon by the Airports Authority of India (AAI) in the 11th Five Year Plan, is perhaps not as difficult a task as it is to sustain profitable operations at the newly upgraded airports. There are technical, social, economic and political paradigms that determine the development of existing or Greenfield airports. The new philosophy is to first develop the infrastructure and initially accept lower levels of profit. On behalf of the Ministry of Civil Aviation, the AAI is responsible for executing all airport related work in the country, says S.R. Raghavendra Rao, Executive Director, Planning, Airports Authority of India in an exclusive tête-ã-tête with SP’s AirBuz Correspondent Mahesh Acharya at Bengaluru.

SP’s AirBuz (SP’s): India’s airlines are expanding their operations to new routes to connect Tier II and III cities that have business potential from tourism. What measures does AAI plan to implement to operationalise unused airstrips in these cities?

S.R. Raghavendra Rao (Rao): Infrastructure development at the existing airports is an urgent requirement. To begin with, 58 airports in Tier II and III cities will be developed under the 11th Five Year Plan currently underway. Terminal buildings and extension of runways are major thrust areas. Only two of the Tier II city airports have facilities to base airliners. It is necessary to create facilities for airlines to base their aircraft in these upgraded airports, as business travellers generally fly out in the morning and return home by late evening. This necessitates locating operations and maintenance crew at the Tier II city airports to carry out the necessary maintenance activities at night so that the aircraft is ready for an early morning departure. AAI is committed to provide the basic infrastructure. It is up to the airlines to develop their business plans to exploit the new infrastructure and facilities being created.

SP’s: Is the absence of basic infrastructure the only hurdle to operate out of these airports?

Rao: Airlines face difficulty in positioning operations and maintenance crew at the Tier II and Tier III city airports as these cities do not offer facilities that a metro or a large city may offer. Lack of hangar facility is also one of the difficulties projected by the airlines. Admittedly, there is a need and this deficiency will be corrected in due course. But it is not that airliners cannot be based at these airports if a hangar is not available. Despite the lack of hangar facilities, airliners are based at places like Kozikhode as the airport generates substantial passenger traffic and hence the revenue.

SP’s: Why did it take us so long to realise that smaller cities also need airports?

Rao: AAI had always been aware of the need for functional airports at smaller cities with potential for business or tourism to provide convenient air connectivity. Ideally, the need for new airport or upgradation of an existing one should be projected by airlines. Even if it is so, it takes a minimum of two years to develop an airport and there is no certainty that airlines will undertake operations after completion of the airport as by then business plan of airlines that is sensitive to a host of factors, may have changed. For example, an airline with plans to operate ATR aircraft may abandon plans to acquire this type of aircraft altogether and may opt for larger jets. So the airport now becomes a white elephant. One such airport was developed with all the infrastructure and manpower support provided by AAI. But in 2007, the low-cost carrier that had earlier decided to operate from this airport was bought over by another airline which did not want to operate from the newly upgraded airport. Decisions by the managements of airlines are influenced by the nuances of their business plans. AAI just develops or upgrades airports.

SP’s: What is it that prevented expansion when private airliners entered the market?

Rao: Airports in few of the Tier II and Tier III cities have existed for quite some time now and in some cases there was better connectivity earlier than we have now. For example, states in the Northeast where the government is now focussing on providing better air connectivity, was indeed well connected in the 1980s when Vayudoot was operating its fleet of 20-seat aircraft that smaller airports could handle. AAI is now extending runways as airlines are inducting larger aircraft in this region. There are many airports that can easily be upgraded and the capacity enhanced, but the airlines do not have the aircraft type that can be operated out of these airfields. The current fleet of 40-50 seat aircraft owned by airlines needs longer runways. Besides, airlines also have to consider break-even operations that depend upon the load factor. If the load factor decreases, airlines will find some technical or operational reasons to discontinue operations at such airports. If the airlines operate on a regular basis, they will gain confidence of the people travelling who will then use their services and the volume of traffic will eventually grow. AAI is now embarked upon improving its marketing efforts. There is sometimes a mismatch between what airlines expect and what AAI can offer.

SP’s: Any example of a situation where such a mismatch may occur?

Rao: Airlines have been seeking concessions from AAI for operating out of smaller airports. But some concessions for scheduled operators are already in place. For example, there are no landing charges for aircraft with less than 80-seat capacity. An airline would expect an airport to be available matching its requirements, at all times of the day irrespective of the economics of the airport operator. While fleet management and viability are the focus of airlines, airport operators have their own compulsions and imperatives. Airport infrastructure once built becomes an immoveable and irretrievable asset.

SP’s: Will the development of these new airfields be undertaken by AAI or the state government, or, will it be a public-private partnership (PPP) model?

Rao: All the three routes are available. In the Northeast it is totally the responsibility of the AAI as private investors are not forthcoming. Greenfield airports are purely PPP model. However, AAI does have a role in providing air traffic management. The state government should also be involved in airport operations. There are some Merchant Airports like in Vidhyanagar in Bellary operated by the Jindals. The state government also works towards airport development through the PPP model as it provides the land. So in a way, it is public contribution. AAI is inevitably a partner to provide air traffic management services. AAI has 13 per cent equity in Greenfield airports at Bengaluru and Hyderabad and is a JVC partner in Mumbai and Delhi.