Business Today

Missing before action

Most of India's smaller cities remain on the fringes of the aviation boom. Regional airlines have been non-starters in India, unlike in Europe, the United States and even China.

Kushan Mitra        Print Edition: July 11, 2010

Back in 2005, several regional airlines were launched. On the pages of national financial dailies, that is. Branded Air Dravida, Indus Air, and Star Airlines, about half a dozen wannabes received licences from the Directorate General of Civil Aviation (DGCA) for operations. They planned to have large fleets of small, short-haul aircraft-made by the likes of ATR, Bombardier and Embraer-and connect various parts of the country.

Most never got off the ground; some did not even get down to ordering aircraft. MDLR Airlines flew for sixodd months between Delhi, Chandigarh and Ranchi on two British Aerospace Avro jets, before closing down operations. Indus Air shut down after a few days of flights linking Delhi, Mumbai and Chandigarh.

Star Aviation terminated the services of most of the people it had hired in hopes of starting flights. Result: the small cities these airlines were meant to connect remained missing from India's aviation map. To be sure, air connectivity has improved to some places. But as the build-out of smaller airports by the Airports Authority of India continues, flights have not kept pace. Delhi, Mumbai, Chennai, Hyderabad and Bangalore still account for most of India's air traffic with most flights either originating or terminating in these cities.

The Delhi-Mumbai sector, with almost 75 flights each way every day, is one of the busiest commercial air corridors in the world. Estimates indicate that some 40 per cent of India's air traffic is on this route. In contrast, even among midsized cities, barring airports at Pune, Goa, Ahmedabad and Guwahati, most non-metro airports have fewer than 10 flights a day.

"It is surprising that there are so few non-metro flights," says Dinesh Keskar, President, Boeing India. "Pune and Nagpur, which are Maharashtra's second and third-largest cities, have been just connected by air and that too on a flight that starts from Delhi." Lowcost carrier IndiGo runs a daily Delhi-Nagpur-Pune service.

IndiGo only recently began a flight between Lucknow and Patna, before which the fastest way between these two state capitals was to connect via Delhi, taking over six hours instead of a short one-hour hop. In Kerala, there are no flights between Thiruvanathapuram in the south and Kozhikode in the north, although both airports receive international flights; a five-hour route via Bangalore in neighbouring Karnataka is the quickest way between the two cities. A train ride takes at least eight hours, and driving most of a day.

If the economic pull of small cities is compelling-think Hindustan Unilever, Nokia, Bajaj Allianz and hordes of businesses that are making a beeline for Tier-II Indian cities and towns-why is it that regional airlines have not taken off despite a benign policy that reduces cost of airlines operations by up to one-quarter? On offer were lower taxes on aviation fuel and a waiver of landing and navigation charges at airports. That, plus operational advantages- smaller planes are easier to fill and those like turboprop ATRs consume less fuel-made for a strong business case on paper.

But the ground realities were different. Most traffic from small Indian cities, experts believe, is to the metros, where airports are not only crowded but also there is no revenue possibilities from servicing regional carriers. For instance, says Ankur Bhatia, Executive Director, Bird Group, a travel and technology business: "I am not sure Mumbai airport authorities will accept a small plane flight request right now."

Then, he points out, there are delays on the ground. So, a flight from Chandigarh to Delhi may be of only 30 minutes of flying time but when air and ground delays as also the one-hour reporting time at airports are added up, the time saved over a four-hour drive or the ride by highspeed Shatabdi train may not be much.

Another odd feature in Indian aviation is what aviation expert Sadeesh Raghavan, an ex-Accenture Partner, calls the "land grab mentality", referring to the unbridled ambitions of airlines in India to corner market share. This translates into the carriers themselves running services to the few small cities they fly to rather than partnering with small airlines running regional operations like in Europe or the United States.

"In the United States, large carriers such as United, American and Delta outsource their regional flights to other airlines. The regional flights work there because they feed passengers into the larger carriers' major routes," says Boeing's Keskar. The Indian aviation industry may move towards that model once the metro and big city routes get saturated.

After 2012, Keskar predicts, "if traffic has to keep on growing at 10-15 per cent a year, traffic will have to move to Tier-II towns".

Another factor that could push that towards reality, as aviation entrepreneurs such as G.R. Gopinath have argued, will be the revival of some 40 non-operational airstrips in India, in places such as Meerut and Warangal, several of which are not capable of handling large commercial jets. Such airstrips make for ideal destinations-with limited competition- for regional carriers using smaller planes and could feed into the larger airlines, as Keskar says.

Bird Group's Bhatia, who says he nurses regional airline ambitions, is still hopeful. "I think the big airlines have seen what happens through unplanned growth, and I won't be surprised if some of them actively support small regional carriers, once better infrastructure is in place," he says. Until then, regional airlines look set to stay where they are-on paper.

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