Open skies over small town India

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Tuesday , November 20, 2007 at 0015 hrs The are a number of opportunities in the aviation sector in India. They include: development of greenfield airports, city-side development in non-metro airports, aviation academies, and maintenance & repair operations (MROs). The most recent initiative from policymakers is the creation of a separate category for regional airlines. The entry of low-cost carriers has brought down the cost of air travel. However, this has largely benefited travel between metros. The minimum airfare between Delhi and Mumbai is almost the same as that between Delhi and Bhopal, despite the latter route being only half the distance. The introduction of regional airlines helps in bringing lower airfares to travellers in and to non-metro cities as well.

Passenger traffic has been growing at almost 25% annually since 2003 and this growth is not restricted only to metros. According to Airports Authority of India estimates, traffic in Tier-II and Tier-III cities such as Ahmedabad, Pune, Goa, Amritsar, Coimbatore and Vishkapatnam is expected to grow by at least 20% a year until 2012. As the impact of the Indian growth engine reaches smaller towns, the travel demand in such cities will also increase. Furthermore, increasing congestion and real estate costs in the metros will make non-metro cities attractive destinations for business.

Regional airlines will operate with hub-and-spoke networks, connecting non-metro cities in a region to the main metro city. From this point, full-service airlines will carry traffic to other metros. While a regional airline should have a fleet of five aircraft by the end of the second year, they can commence operations with a single aircraft. Such a low entry barrier will encourage many players to enter the market. The existing policy framework in aviation also encourages regional airlines through the waiver of landing and parking charges for smaller aircraft. Regional airlines could also benefit from lower parking charges by using non-metro airports as hubs. The US has a mature regional airline model wherein one out of every four domestic passengers flies a regional airline. Most regional airlines are subsidiaries of larger airlines or have interline or code-sharing arrangements with larger airlines.