Hope Amidst Odds

Regional aviation is bound to take-off someday, if only because the industry is in the process of acquiring hundreds of new planes and is soon likely to resume sustained double-digit growth. This will force the airlines to pioneer new routes to new airports. And the government can certainly do more to encourage prospective regional carriers.

Dark clouds have been hovering over India’s commercial aviation industry for the past year or so. In 2012, domestic passenger numbers slid almost three per cent below the tally for 2011, making it one of the most dismal years on record. Some experts, however, believe the worst may be over. Air India, till now on life support, is hopeful of registering cash positive this financial year and may even turn the corner eventually. The other ailing giant, Kingfisher Airlines, is grounded with little prospects of resuming operations early. This automatically reduces the industry’s excess capacity and helps the remaining carriers grab the market share practically overnight. The financial health of all the airlines is also improving, thanks to fares that have shot up at an average of about 30 per cent in a year. But what hope is there for regional aviation?

Troubled Times

The plight of the country’s newest and only functional regional airline, Air Mantra launched by the Religare group, is instructive. It began operating on July 23 last year with two 17-seat Beechcraft 1900D turboprop aircraft between Amritsar and Chandigarh and has since expanded to Jammu and Kargil. It flew just 100 travellers in October and 300 in November. Mantra desperately needs more passengers, but how many will cheerfully pay the Rs. 3,000 tab for a ticket from Chandigarh to Amritsar when they can conveniently make the trip by surface at a fraction of the cost?

Then there’s Air Odisha. Although it operates under a nonscheduled permit, it mainly connects regional airports. And its experience is equally woeful. It launched operations on November 2, 2012, from Bhubaneswar to Rourkela via Jharsuguda, using nineseater Cessna Grand Caravan 208B turboprop aircraft. A ticket between Rourkela and Bhubaneswar cost Rs. 5,500. The flights continued in an unreliable fashion before being suspended a month later, perhaps because too few passengers were willing to pay the fare. The company resumed flights after several weeks.

Across the country, similar tales are told of services to small regional airports being erratic, slashed or completely withdrawn, so much so that only 73 airports are active, nine less than a year ago.

A High-Cost Environment

Many of the problems that plague regional aviation are no different from those that afflict India’s entire airline industry. In most countries, aviation is recognised as an infrastructure component, vital to the health of the economy and accorded special treatment. However, strangely enough, it is still taxed as a luxury in India, making the operating costs of the country’s carriers among the highest globally. For instance, taxes mean that aviation turbine fuel (ATF) is perhaps 50 per cent more expensive in India than in Dubai, Colombo or Singapore. Regional flights are severely affected, because fuel consumption is inherently higher over short-haul routes. Regional airlines generally prefer to operate turboprop aircraft like the ATR 42-500 (50 seats), the ATR 72-600 (68 seats) and the Bombardier Q400 NextGen (78 seats). Aircraft with take-off weight less than 40,000 kg pay just four per cent sales tax on ATF throughout the country, whereas larger aircraft pay up to 30 per cent in some states.

Planes with up to 80 seats are exempt from airport landing and parking charges and billed at reduced rates for navigation facilities. These concessions do help regional flights. But they are applicable to any airline, not just regional carriers. Hence, they have the unintended consequence of pitting small regional carriers against the major airlines on the same routes. Air travel in India is extremely price-sensitive and many travellers sort their flying options according to ticket price and then automatically choose the lowest fare option to the exclusion of most other considerations. And the big players are better placed to undercut fares and attract travellers.

Lack of suitable airports is another major problem facing regional aviation. Therefore, the ongoing modernisation of 60 non-metro airports by the Airports Authority of India (AAI) is significant. About 35 of these refurbished airports are expected to be ready in a few months. Some Greenfield airports are also in various stages of planning and construction. And of particular interest to regional operators, the AAI is studying viable models to make dedicated low-cost terminals. These would help cut terminal charges, especially in the smaller cities, so that no-frill carriers (that includes regional operators) can minimise costs. Although low-cost airlines attract the lion’s share of domestic passengers, India doesn’t have a single low-cost terminal.

At Your Regional Service

In late 2011, a few companies such as Freedom Aviation, Air Pegasus, Deccan Charters, Indus Airways and Karina Airlines secured no objection certificates (NoCs) to introduce regional services but they are reportedly finding it difficult to rent planes because lessors are understandably cautious after their nightmarish experience with Kingfisher Airlines and Paramount Airways. There is also a desperate shortage of capital. Funding a viable regional airline could take Rs. 100-150 crore. But banks and other financial institutions are reluctant to invest seeing the precarious financial state of the existing carriers. And time is running out for the regional applicants since their NoCs are valid only for 18 months.

In the absence of dedicated regional carriers, the major airlines are the only source of flights to the remote parts of the country. There is growing realisation that if they wish to expand, they must branch out to smaller destinations. Right now, the brightest hope for regional connectivity is SpiceJet, thanks to its fleet of 15 Bombardier Q400 NextGen aircraft that have been acquired to connect Tier-2 and Tier-III airports, apart from some short-haul destinations. The carrier also has options for another 15 of these powerful and versatile turboprops.

SpiceJet is closely followed by Jet Airways which has 16 ATR 72-500 aircraft. It is also acquiring five ATR 72-600 aircraft and they should be flying by March. They will help Jet touch a number of offthe-beaten-track airports that it cannot service with its jets. The ATR 72-600 comes equipped with the latest avionics and can seat 68 passengers in an all-economy layout. It is ideally suited for regional operations and daily ATR flights already connect Mumbai with Bhuj, Diu, Porbandar and Udaipur. Air India’s wholly-owned subsidiary Alliance Air (Air India Regional) has been rendering yeoman service in the Northeast, but its operations are now being curtailed. IndiGo and GoAir have only Airbus A320 aircraft, generally unsuitable for regional airports, since many of them have short runways.