Airports are the face of a country and centres of great economic activity in many developed nations.
Liberalisation of aviation has promoted new services globally and led to a boom in global air travel. Just as the bullock cart once drove social and commercial interactions between places in the ancient era, air transport today promotes the global exchange of goods and services as well as the travel of people.
Aviation, however, transcends direct trade benefits. Many airports in India are being modernised, especially through the public-private partnership model, whose success has provided much-needed impetus to the Indian government and airport operators to confidently undertake greenfield and brownfield airport development. Continued liberalisation and the encouragement of private participation have led to availability of better passenger and cargo facilities, besides an increase in traffic growth surpassing expectations. The transition to liberalisation has taken various forms, ranging from extremely rigid agreements to open sky policies.
Coupled with the emergence of world-class airports in India, liberalisation offers another opportunity for airlines and airports to create the hub model for both international and domestic operations. The hub-and-spoke model is an efficient, cost effective, reliable, safe and secure mode of transport for passengers and cargo.
An airline hub is an airport that airlines use as a transfer or transit point to take passengers to their intended destination and the most efficient way to link numerous remote points on a network by a one-stop connection. For years, India was unable to develop any of its metro airports into hubs primarily because domestic and international terminals were separated by considerable distances. International airports and airlines exploited this weakness of Indian infrastructure and created hubs outside India. At present, most Indian passengers transit via hubs such as Singapore, Dubai, Bangkok, London, Hong Kong, Frankfurt, Paris and Amsterdam, used for passenger as well as cargo flights.
Multiple advantages make the hub-and-spoke model most popular, while lower airport management costs via economies of scale make it more efficient. A hub-and-spoke model could also ensure regional airports become viable due to the strong tourism potential of unserved destinations.
For passengers, the hub-and-spoke model permits more frequency and choice as well as quick transfer facility. Economic activities thrive at hub airports as more passengers transit through hubs and many utilise the time gap between arrival and departure flights for meetings, sightseeing, shopping, etc. With many international and domestic flights landing at a particular hub airport, this could be an opportunity to set up a maintenance and repair operations (MRO) centre to overhaul or repair aircraft. Direct and indirect employment is expected to surge, while trade and tourism receive a big boost, generating significant revenues, jobs, and FDI in the region.
The hub-and-spoke model also increases the possibility of accessing remote and unserved areas, since major airlines may no longer be forced to operate less popular routes, while low-cost carriers (LCCs) service feeder routes due to the advantage of lower airport fees, discounted air fares, etc. Compared to point to point, the routing strategy can be optimised in a hub-and-spoke model to attract more passengers. Airlines could serve more markets with existing resources. Without a considerable feeder network at dedicated hubs, Indian carriers cannot expand to unserved destinations. Synergising the potential of LCCs with anchor airlines to optimally harness the hub-and-spoke model will ensure connectivity of city centres around the hinterland airports to the hub airports.
With sufficient infrastructure at metro airports, it is now possible to have a true hub-and-spoke model in India. Indian carriers have been unable to enjoy economies of scale by aligning schedules to capture transfer traffic currently leaking out to Middle East and South-East Asian Hubs, severely limiting growth opportunities. Moreover, the cost of aviation turbine fuel in India is almost twice as much compared to the Middle East and South-East Asian nations. Airlines operating from these countries enjoy cheaper fuel and increased operating profits and thereafter undercut competition by selling seats cheaper to lure passengers from Indian carriers.
Airports alone cannot develop the hub-and-spoke model. Collaborative approaches are imperative, with airports and airlines working in tandem to develop a symbiotic relationship. The government should guide various agencies to facilitate the minimum connectivity and network. State tourism departments should actively co-ordinate with airports and airlines to tap India?s tourism potential. Procedural bottlenecks from the pre-liberalisation era should be identified and removed.
Moreover, to promote Indian airports as hubs, only Indian airlines should have access to non-hub airports in India. In a nutshell, coordinated efforts from all stakeholders will be required to convert some of the new modernised Indian airports into thriving passenger and cargo hubs.
The author is General Secretary, Association of Private Airport Operators