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Judiciously located low-cost regional airports are an essential requirement to support regional connectivity. They may also help to decongest the major airports by luring traffic.

Air Costa, promoted by Vijayawadabased construction firm Lingamaneni Estates and Projects Limited (LEPL), is the latest entrant to the sadly exclusive club of regional airlines in India. Air Costa happens to be the first regional carrier in South India and will link Vijayawada, Hyderabad, Chennai, Bengaluru, Ahmedabad and Jaipur using a small fleet of two Embraer E-170 and one E-190 regional jets. Anyone interested in the progress of regional aviation will surely wish the new venture well. Subsequently, Pune, Goa, Madurai, Trivandrum, Visakhapatnam and other destinations may be added to its network.

Minister of Civil Aviation Ajit Singh believes that the aviation sector needs to be equitable and inclusive and that the airline industry must focus on improved regional connectivity in order to grow. The major carriers do devote a small portion of their capacity to regional routes but dedicated regional airlines such as Air Costa are best placed to speed up the process of linking remote and potentially unattractive destinations.

India’s regional aviation policy of August 2007 sought to encourage small enterprises to link Tier-II and Tier-III cities to the nearest metro. It is yet to taste success. In the Northern region, MDLR Airlines was launched in March 2007 with three 70 to 82 seat Avro RJ70 regional jets but had to quit in November 2009 because it could no longer meet lease payments. And Air Mantra began flying in July 2012 with two 19-seat Beechcraft 1900D turboprop aircraft but abruptly shut shop in April this year.

Indeed, the regional aviation scene is littered with missed chances, unfulfilled promises and abject failures. According to the Centre for Asia Pacific Aviation (CAPA), “There is clearly a fundamental issue with the viability of regional operations due to the cost structure, airport infrastructure limitations and the overall policy environment.” Policy issues and cost structure concerns can be sorted out fairly quickly, given the political will. But what about the airports? Despite the best intentions, they take time to plan, design, finance and construct.

Airports by the Hundreds

Analysts agree that lack of airport infrastructure in Tier-II, Tier-III and Tier-IV locations in India is a major impediment to regional connectivity. There is certainly no dearth of runways—official estimates place the number at over 450. However, many of these are small airstrips of World War II vintage and are probably encroached upon, unusable or abandoned. There are just 93 operational airports including six run by private operators plus 28 civil enclaves at military stations. Many cannot be used by standard narrow-body jets such as the Airbus A320 and Boeing B737 that form the bulk of the country’s commercial fleet. However, they can support regional turboprops such as the Bombardier Q400 and the ATR 72. But the availability of functional airports is woefully disproportionate to the country’s size.

Last year, the Rohit Nandan Committee that looked into measures to improve air connectivity across the country strongly recommended that 225 additional airports, including those run by state governments and some privately owned ones, should be made operational and set a two-decade time frame to achieve this. More recently, the Central Government has decided to develop over 50 Greenfield low-cost airports, to be followed by another 50 in the second phase. Considering the glacial pace at which most infrastructure projects meander along this is likely to take several years. And local opposition will probably stall many of them.

Land acquisition issues and environmental norms mean that in most cases, the runway length and airport facilities will have to be kept to the bare minimum. The usual practice is to try and set up small, functional airports initially and offer to undertake necessary expansion at a future date. Since such promises might never fructify, it would be prudent for regional aviation entrepreneurs to plan for short-field capable turboprops rather than jets. India’s carriers are already incentivised to operate smaller aircraft such as 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 value added tax (VAT) on aviation fuel throughout the country, whereas larger aircraft pay up to 30 per cent VAT in some states. Planes with up to 80 seats are exempt from airport landing and parking charges and are billed at reduced rates for navigation facilities.

Lower the Costs

The last few months have again underlined the fact that air travel in India is highly price-sensitive. This is even truer of future regional aviation where there will be many first time and discretionary flyers. Unless fares are reasonably priced, passengers may choose to rough it out on a train or bus, reckoning the cash saved worth the inconvenience.

Regional carriers, even if generously supported by the government, can only survive if based on the low-cost, low-fare model. They can neither afford high fuel prices nor can they pay airport charges that currently constitute 10-12 per cent of the operating cost of an airline. That is why airport infrastructure must be planned and constructed with the lowest possible tariff in mind. Else many new regional airports might be shunned.

Fortunately, the Airports Authority of India (AAI) recognises this problem. It is seeking to devise a model for dedicated low-cost airports where facilities may be downsized to provide minimum but adequate amenities to passengers. It is also looking into creating separate low-cost terminals at existing airports in order to cater to regional carriers cheaply. Since most regional airports will attract just one or two low-capacity commercial flights per day, plans should simultaneously be devised to make them economically viable through non-aeronautical revenue and city-side development. This may enable AAI to obtain at least a small return on its investment. Even today, just a handful of AAI airports are profitable.

The financial viability of regional airports will always be fragile, given their huge inescapable fixed costs and low traffic potential. However, state governments, which are direct beneficiaries of regional aviation, can support them from the planning stage itself. For instance, airport infrastructure can be set up much faster and cost overruns avoided if governments hasten land acquisition and facilitate clearances. They can also share construction costs and offer other concessions and guarantees. Multi-modal surface connectivity, utilities and other services are items they are best placed to plan for and provide.

As the number of airports in the country rises, personnel requirements are bound to increase. For instance, aviation industry experts warn of an impending severe shortage of air traffic control officers (ATCOs). The training of these and other professionals takes time and needs to be stepped up in line with the high expected growth in civil aviation. What about security? In these hazardous times, even a small regional airport that hosts just one flight a day needs a full complement of security personnel with equipment to ward off terror threats.

A Cautionary Tal e from Karnataka

According to CAPA, in the next five years alone, an investment of around Rs. 17,500 crore ($14 billion) will be required for airports across the country. And although there has been much progress in improving infrastructure over the last decade or so, especially in the metros and 35 major non-metro airports, the AAI has no capacity enhancement plan for existing airports beyond 2017.

New regional airports are clearly necessary but they are hardly a panacea for regional connectivity. Private carriers such as Air Costa will only fly to destinations where they expect to make a profit and pull out if they do not. Therefore, detailed market surveys and viability assessments are essential before planning new airports. Across the globe scores, perhaps hundreds of airports lie moribund or even abandoned. Some were built fairly recently during prosperous times but swiftly turned into white elephants. Even in India, of the 120 or so operational airports, only about 70 currently draw regular commercial flights. Mysore’s Mandakalli Airport is a stark example. Defunct from the mid-1980s, it was reopened to commercial aviation in 2010 with much fanfare but has not been able to entice the airlines. And five other small regional airports in Karnataka under the public-private partnership (PPP) model, in various stages of construction, are now in limbo for one reason or another. The wasted investment should serve as a warning against going on an airport-building spree, especially for political reasons.

After some years of setbacks, marked by rivers of red ink and the disappearance of Kingfisher Airlines, aviation analysts are cautiously optimistic about the prospects of India’s airline industry. The somewhat overblown projections of the past are likely to be scaled down considerably but it is still likely that the country will have over 300 million domestic passengers by 2020. And CAPA believes that airport infrastructure is sadly underprepared to support such growth. “It will not be long before India resumes sustained double-digit traffic growth and at many airports across the country capacity constraints will be encountered sooner rather than later. Since airport capacity cannot be created overnight, there is a need to adopt a proactive approach to airport development, identifying and preparing for potential constraints.”

In the final analysis, judiciously located low-cost regional airports are an essential requirement to support regional connectivity. They may also help to decongest the major airports by luring traffic.