Budget Airports – Are They Viable?

The scheduled commercial airlines can be broadly classified into three categories – fullservice carriers (FSCs); low-cost carriers (LCCs) and regional carriers and they fly in and fly out of airports which do not make that kind of distinction. There are differential charges at these airports, but it is not based on the above classification.

While low-cost carriers are proliferating around the world, low-cost airports or budget airports are handful. The low-cost carrier terminal also known as budget terminal is a specific type of airport terminal designed with the needs of low-cost airlines in mind. Though terminals may have differential charges, the concept of an all budget terminal is a fairly recent one, but we notice that they are not doing too well. The budget airport at Changi Airport which opened on March 26, 2006, closed down on September 25, 2012. This was the second budget airport in Asia, the first being the Kuala Lumpur International Airport 2 (KLIA2).

The airport offered lower landing fees, handling fees and airport taxes. It cut back on amenities such as aerobridges, elaborate physical structures and was no-frills airport. The budget airport in Malaysia had 68 gates and was designed to cater for 45 million passengers a year. However, the airport has come under severe criticism on the basic facilities and even improper runways. AirAsia, which used this airport, has been highly critical of its maintenance.

Stripped down terminal

Basically, a budget airport is a stripped down airport terminal which substantially reduces cost of operation for low-cost airlines and even regional carriers. The cost reductions come in the form of the building per se which could be simple and inexpensive structure. It may not have steel and glass structures to reduce air-conditioning costs. The amenities at the airport would be minimal in terms of restaurants, parking lots, duty-free shops, no walkways, aerobridges, few baggage carousels, etc.

In India, there is no exclusive budget airport catering to either LCCs or regional airlines, though there is a clamour in the major metro cities for secondary airports, firstly to decongest the main airport and secondly to give benefits to LCCs and regional carriers who are content with no-frills airports. The single domestic terminals that cater to both regular airlines as well as low-cost carriers are under immense pressure due to unavailability of runways, delay of flights, disruption of schedules, and such. One key parameter where LCCs differ globally from FSCs is the choice of airport. Flying out of low-cost airports enables airlines operate more efficiently and unbundle services, thus resulting in lower airport-related costs (up to 13 per cent).

Examples around the world

In Melbourne, Australia, Terminal 4 – originally called the Domestic Express or South Terminal – is dedicated to budget airlines and is the first facility of its kind at a conventional airport in Australia. It was originally constructed for Virgin Blue (Virgin Australia) and Impulse Airlines. Virgin Blue eventually moved into Terminal 3 following the demise of Ansett. Since the terminal is located next to the main terminal building, unlike in Singapore and Kuala Lumpur, it is running fairly well. The terminal was rebuilt by Tiger Airways Australia, which has used it as its main hub since it operated its first domestic flight on November 23, 2007. The new T4 terminal is 35,000 sq m (3,80,000 sq ft) and linked “under one roof ” with T3. Terminal 4 is currently used by Tigerair Australia, Regional Express Airlines and Jetstar.

Basically, a budget airport is a stripped down airport terminal which substantially reduces cost of operation for low-cost airlines and even regional carriers

First budget airport in France

The Marseille Provence Airport, France’s fifth busiest airport for passenger traffic and third largest in terms of cargo traffic, is France’s first budget airport. The airport serves nearly 150 regular destinations, the largest offer after Parisian airports. Beuvais is another airport in France which low-cost carriers operate from. RyanAir operates its flights from Beauvais to Rome and other destinations. RyanAir in Europe and Southwest in US thrive on low-cost airports.

With low-cost carriers doing well in India, the concept of lowcost airport terminals has been around for some time, but the airlines have not come together to voice their need, being busy handling operations which are so stressful in turbulent times. In such a scenario, if the government moots low-cost terminals in Tier-II and Tier-III cities it would help immensely the regional carriers. A separate terminal for the no-frills airlines and regional carriers and even general aviation would eliminate dependence on the amenities of regular domestic terminals. This would mean better schedules, timely arrivals and departures and thereby, a more pleasurable experience. The best examples of live and let live is that of Luton and Stansted in London which is for low-cost carriers and general aviation, while Heathrow is one of world’s important international airports.

160 non-functional airports to be developed

However, for the first time there is mention of development of low-cost airport plan. The Union Minister of Finance Arun Jaitley while presenting the Union Budget 2016-17 announced to develop 160 non-functional airports across the country. “In civil aviation, 160 non-functional airports to be developed at a cost of Rs. 50-100 crore each and 10 of 25 defunct airstrips to be developed in partnership with state governments.” This development will be a part of a low-cost airport plan. In fact, the previous UPA regime had planned 200 no-frills airports and had developed some airports which have turned ghost terminals with no aircraft taking off or landing.

A budget airport or secondary airport in a metro makes sense when the main airport is bursting at its seams and in the bargain the LCCs and regional carriers end up suffering. It would be in their interest to have a secondary airport, provided it has substantial traffic. If it is a matter of few daily flights operating from the budget airport, it makes hardly any business sense both to the airport and to the LCC. It has to be a viable mix. Also budget terminals also have to consider if they only serve budget airlines or all airlines.

Draft policy focus on airport development

The draft National Civil Aviation Policy talks about developing airports by the state governments, private sector or in the public-private partnership (PPP) mode. It mentions how it will endeavour that the future airport projects in India, both greenfield and brownfield have cost-efficient functionality with no compromise on safety, security and efficiency. Operators of future airport projects will not levy airport charges, concession fee and royalties, etc, on MRO, cargo, ground handling, the aviation turbine fuel (ATF) infrastructure other than a reasonable lease rental.

Tariff at all future airports will be calculated on a ‘hybrid till’ basis. 30 per cent of non-aeronautical revenue will be used to cross-subsidise aeronautical charges. In case the tariff in one particular year comes out to be excessive, the airport operator and regulator will explore ways to keep the tariff reasonable, and spread the excess amount over the future. The policy has listed out many other possibilities to help airports be sustainable. It remains to be seen how these upcoming airports will be utilised by airlines who are keen on expanding route network, if not they will also end up as ghost terminals. The incentives have to be for both—airline as well as airport for a win-win situation.