Time to go local

India has potential hubs aplenty but most are bereft of sufficient spokes. The government’s new civil aviation policy should include a comprehensive regional aviation programme that actually encourages small regional airlines to take connectivity to the remote parts of the country.

India’s aviation market is globally the ninth largest and by 2020, it is likely to become the third. But the country’s airlines generally seem content to ignore the smaller towns and focus on the more lucrative metro-tometro routes. As a result, the regional market is woefully underserved. However, some far-sighted carriers are now in search of greener pastures. They feel the time is ripe to go regional. The Airports Authority of India (AAI) also expects traffic from non-metro airports to rise to 45 per cent of total traffic in the next five years, up from 30 per cent currently. But where are the airports?

Of the 127 airports in India, only 89 are operational. Barely 36 can take jets such as the Boeing B737-800 (189 economy seats) or Airbus A320 (180 economy seats). Airlines with regional aspirations need smaller jets such as the Bombardier CRJ700 (78 seats) or the Embraer E170 (80 seats). With fuel prices rising, turboprops such as the 78-seat ATR 72-500 and the 80-seat Bombardier Q400 NextGen are capturing greater market share by virtue of their fuel-efficiency. Aircraft with up to 80 seats are exempt from airport landing and parking charges and billed at reduced rates for navigation facilities. Those with take-off weight less than 40,000 kg also pay just four per cent sales tax on aviation fuel across the country as against up to 30 per cent in some of the states for larger aircraft. Today, fuel constitutes 45 per cent or more of an airline’s operating cost, so this is a big gain for the small ones.

Hubs and Harmony

Sunita Singh, a metropolitan dweller wishing to travel to a distant city, has the luxury of choosing a convenient flight from a number of options and flying straight to her destination. This is “point-to-point transit”. But Sunita Sharma, who lives in an outlying town, may not be so lucky. She has first to catch a short-haul flight or travel by surface transport to a central location called a “hub” from where long-distance flights to her destination are available. This is the “hub-and-spoke” distribution model, a system of connections arranged like a chariot wheel, in which all the traffic moves along the spokes connected to the hub at the centre. The model is especially popular in transportation and telecommunications. An airline hub is an airport serving as a transfer point to fly passengers to their intended destinations. Small airlines may use only a single hub, while large airlines generally have several hubs.

Low-cost carrier SpiceJet recently embarked on an ambitious hub-based programme to take aviation to long-neglected smaller destinations. SpiceJet CEO Neil Mills said, “We decided to strategically focus on improving air connectivity in Tier-2 and Tier-3 towns as we believe there is a large market in India that is yet to be touched by the benefits of the aviation revolution.” The carrier has ordered 30 Bombardier Q400 NextGen aircraft which it calls a “game changer”. The 15 firm-order planes will be delivered by July this year, with a decision to confirm the additional 15 options likely by soon. SpiceJet launched the first phase of its regional strategy last September with Hyderabad as a hub, linking Aurangabad, Bhopal, Indore, Mangalore, Rajahmundry, Tirupati and Vijayawada. It plans to set up another five regional hubs at Chennai, Ahmedabad, Bangalore, Kolkata and Delhi with five Q400 aircraft at each hub in an effort to connect most large towns across the country. Many of the airports, that it will touch, will boast a scheduled flight for the first time.

The highly successful US regional aviation model is cited as one that India could follow. In America, small regional jets or turboprops economically convey little groups of passengers from remote airports to the nearest hub. At the hub, passengers are transferred to large airliners belonging to the mainline carriers and transported over greater distances to other hubs. The regional and national airlines function in harmony on different routes, complementing each other, rather than in competition on the same routes. In India, incipient attempts to launch regional services were abandoned in quick time mainly because small regional airlines were in direct competition with established major carriers. It is a no-brainer that the fledgling airlines would simply be priced out of the market and so they were. Now the regional space is sought to be occupied by small aircraft belonging to the major carriers themselves. Apart from SpiceJet, GoAir, Air India and Jet Airways are keen on expanding regional services. Kingfisher Airlines’ cessation of low-cost operations should create further opportunities for others to explore the hub-and-spoke system.