Growth of Regional Air Connectivity in India
India’s civil aviation industry is on a high trajectory and is pegged to become the third largest aviation market by 2020 and the largest by 2030, globally. Right now, it is the ninth largest civil aviation industry and has a credible market share of around US $16 billion.
Civil aviation industry has ushered in a new era of expansion driven by factors such as introduction of Low Cost Airlines (LCC), modern and efficient aircraft, IT interventions and growing emphasis on regional connectivity.
As quoted by Director General and CEO, IATA, Mr. Tony Tyler – “The world is focused on Indian aviation sector; (global) manufacturers (plan to set-up manufacturing facilities), (global) airlines, investors and travellers. If we find a common purpose amongst all stakeholders in Indian Aviation, a bright future is ahead”.
In May 2016, domestic traffic rose by almost 21.63%, from 7.13 million to a whopping 8.67 million. Indian domestic air traffic is expected to cater to over100-million passengers by FY-2017, as per Center for Asia Pacific Aviation (CAPA). The sector had catered to about 81 million passengers back in 2015. This staggering growth signifies that the schemes launched by AAI and Ministry of Civil Aviation are reaping benefits.
The government is concentrating on triggering growth with aviation market by promoting regional connectivity. The government in its detailed action plan envisions connecting Tier-II and Tier-III cities to the national grid. The government believes that the inter-regional routes once operational will trigger the next wave of growth for India’s aviation industry.
Ministry of Civil aviation launched the Regional Connectivity Scheme (RCS) in July, 2016 through which it plans to channelize drafts for boosting regional connectivity. The policy reiterates that the government will go ahead with existing route dispersal guidelines, under which airlines have to fly to remote areas, even as it moots the creation of new airports that can be constructed at costs less than Rs.50 crore.
According to Professor Nawal Taneja, emeritus at Ohio State University, who also serves as an advisor to airlines and governments worldwide – “Connectivity is extremely important not only to enhance social life, but also to enhance economy in a region. Connectivity through airlines is the most cost-effective way to achieve both objectives. And, if the initiative is implemented strategically in numerous regions across the country, then it will help to develop the nation’s economy. ”
But greater regional air travel also calls for a business strategy that is different from the usual one adopted by airlines in India—that of being a provider of low-cost seats between two airports.
Such a strategy warrants a different mindset for the value proposition. Then all resources must be assembled to develop market and then monitor such a plan, he said- “Many leading businesses are taking this approach of digitizing their businesses—autos, hotels, pharmaceuticals, banks, etc. Only a handful of airlines around the world are exploring such initiatives”
Also, according to a November 2015 report by rating agency – India Ratings and Research Pvt. Ltd, the measures adopted in the draft policy on regional connectivity have the potential to galvanize passengers in places, where connectivity is currently dismal. With the renewed interest of new airlines in regional flights and expected low operational costs due to no-frilled airports, passenger traffic could improve drastically, the agency said.
The 2016-17 Union budget speaks of giving a push to greater domestic air travel as the central government aims to partner with state governments to develop unused airstrips. Civil aviation Minister Ashok Gajapathi Raju speaking about the government’s effort said that his ministry has devised an action plan for the revival of such airports.
The action plans mandates the central government to identify regional airports across the country. It will then ask respective state governments to share the cost of developing regional airports. The plan also includes the revival of airports owned by state-run Airports Authority of India (AAI). In FY 2016-17, AAI proposes to revive 10 such airports. These airports will initially be unviable and would require budgetary support from the government.
AAI plans to spend about Rs.20,000 crore over the next five years, of which Rs.18,000 crore has been earmarked for aerodrome schemes, Rs.128 crore for information technology up gradation and Rs.865 crore for airport systems. With regards to the same, AAI has already started talking to project management consultants to develop 11 airports, which include Agartala, Guwahati, Srinagar, Lucknow, Pune, Patna, Tiruchirappalli and Leh.
The government working proactively has helped regional airlines sustain their operations by introducing multiple beneficiary schemes. To help such airlines survive the demanding conditions the government has waived off taxes and has reduced other operational costs in the past. Regional airlines like Air Costa, Tru Jet, Air Pegasus and Vistara are benefitting hugely from this scheme. This measure of the government not only promises to revolutionize the transportation sector but also provides a strong platform for budding regional airlines.
Various measures taken up by the Indian government promise to boost regional connectivity over time. These measures are slated to bring Tier – II and Tier –III cities to the national grid and this in turn promises to spur economic and industrial growth across the sectors. The aviation sector itself stands to gain unmatched mileage once these programs are worked at ground levels.