Infrastructure - Good Days Ahead

A strong regional airline network would relieve much of the pressure from the large airports. However, regional aviation cannot prosper without a determined programme to build or renovate at least 200 airports in Tier-2 and Tier-3 cities all over the country.

These are exciting times for Indian commercial aviation. According to the Centre for Asia Pacific Aviation (CAPA), annual passenger traffic at Indian airports tripled from 39 million to 123 million in the past decade. But the best is yet to come. CAPA reckons that by 2020, passenger traffic in India will reach 450 million annually. Currently, the world’s ninth largest aviation market, India will then be the third largest, following the US and China.

But are these surging numbers within the handling capacity of India’s aviation infrastructure? Over the past few years, upgradation and modernisation of the metro airports was on high priority. The Airports Authority of India (AAI) also launched an ambitious project to modernise 35 non-metro airports, while 12 Greenfield airports are in various stages of development. Some state governments are making efforts to build new airports albeit with mixed results due to impediments such as paucity of resources, land acquisition issues and vested interests. This is a pity, as passengers from smaller cities without air connectivity have to travel large distances by road/rail to board an aircraft. A strong regional airline network would relieve much of the pressure from the large airports. However, regional aviation cannot prosper without a determined programme to build or renovate at least 200 airports in Tier-2 and Tier-3 cities all over the country.

The Story of Regional Aviation

Small airliners described as “regional jets” were first introduced in North America to connect small remotely located airfields to the nearest major airport constituting a “hub-and-spoke” arrangement. Operating on a modest scale, the “regional airlines” as they came to be known, pioneered the concept of low-cost travel long before the expression ‘low-cost carrier’ (LCC) was coined. At the hub, passengers arriving from outlying airports would be switched to large airliners belonging to the mainline carriers and transported over great distances to other hubs. Regional airlines currently carry one in four domestic passengers and account for more than half of all US departures. However, with oil prices on the rise yet again, small regional jets such as the Embraer E-Jets and the Bombardier Canadair Regional Jets (CRJ) are at some disadvantage since their per-seat fuel consumption and hence the operating cost, works out higher than for single-aisle airliners such as Boeing B737 and Airbus A320. Hence the trend towards larger (150-seat) regional jets.

India’s Ministry of Civil Aviation has long wished to get regional airlines up-and-running. To this end, a policy introduced in August 2007 had the fine intention of making regional airlines a reality. Under the new policy, small aircraft such as the ATR 42 and ATR 72, Embraer E-170 and E-175, Bombardier CRJ200 and CRJ700, Bombardier Q400 and Avro 146-RJ70 are beneficiaries of a slew of concessions. Aircraft of capacity less than 80 seats are exempted from landing and parking charges at airports, and pay route navigation facility charges (RNFC) at reduced rates. Tax on aviation turbine fuel (ATF) for airliners of take-off weight up to 40,000 kg has been reduced to four per cent as against the 28 to 30 per cent for larger carriers. With ATF constituting 45 per cent of an airline’s operating cost, this is a major advantage for regional carriers. However, for a variety of reasons, not a single regional airline is in operation today. There are reports that four to five regional airlines may get off the ground shortly but their plans are yet to fructify. At present, the regional aviation space is occupied solely by the national carriers.

Fleet Fundamentals

Where do India’s six airlines stand when it comes to regional operations? A major constraint is that there are only 36 airports in the country that can take jet aircraft like the 189-seat Boeing B737-800 or the 180-seat Airbus A320. Last year, a study by Embraer found that around 30 per cent of the flights from smaller cities depart with loads appropriate for a 70-seat plane and 47 per cent of the flights depart with loads appropriate for 90-110-seat planes. Airlines with regional aspirations, therefore, need to have smaller aircraft like the 50-seat ATR 42, the 78-seat ATR 72 and the 78-seat Bombardier CRJ700 that open up a whole range of opportunities not afforded by the larger jets.

• The lone state-owned carrier Air India has a huge fleet of 133 planes, mainly a mix of Airbus and Boeing variants but does not have a true regional aircraft. However, its wholly-owned subsidiary Alliance Air (Air India Regional) has seven ATR 42-320 and four Bombardier CRJ700 aircraft, all dry leased, available for regional flights.
• Jet Airways has a fleet of 97 aircraft, mainly Airbus and Boeing variants. It also has 20 ATR 72-500 aircraft for regional operations. Its low-cost arm JetLite operates 18 Boeing 737s.
• Kingfisher Airlines has a fleet of 66 aircraft, primarily the Airbus variants, 25 ATR 72-500 and two ATR 42-500, usable in regional aviation.
• IndiGo, the largest of the LCCs, operates a fleet of 42 Airbus A320 aircraft only.
• SpiceJet currently has 30 Boeing 737 variants only.
• GoAir, the smallest airline, has just ten Airbus A320 aircraft.

Thus, barely 58 aircraft operating in India’s skies have the necessary attributes for regional aviation. Sensing an opportunity, SpiceJet has ordered 15 (plus 15 options) Bombardier Q400 NextGen turboprop airliners which can operate up to 97 airports across the country. GoAir believes that the Indian market has significant potential for regional aircraft and is considering adding smaller planes to tap this demand. Jet Airways is developing Hyderabad as a “mini-hub” with the introduction of 15 new flights connecting smaller cities. Kingfisher Airlines has also launched some new flights connecting Tier-2 cities to metro destinations. Convinced of the need to add off-the-beaten-track destinations, Air India plans to induct over 40 ATRs and Bombardier CRJs to shore up the flagging operations of its subsidiary, Alliance Air. However, its severe financial woes have compelled shelving of plans for now.