Delhi, Mumbai airports could grow in stature once international service rules are eased

The government green signal to the Tata Sons-Singapore Airlines alliance to start a full service airline reignites hopes for airport operators GMR and GVK to develop Delhi and Mumbai as hubs for international air transport.

With the civil aviation ministry keen to do away with the rule that barred domestic airlines from international services before five years of operations and a fleet strength of 20, Tata-SIA?s new full-service airline could be among the first beneficiaries of a rule change.

Singapore Airlines officials have revealed their intention to start international services as part of the venture with Tata Sons. ?The airline will begin with domestic services although we would like it to also operate international services. However, this will depend on obtaining further regulatory approvals,? said Nicholas Ionides, Singapore Airlines vice-president (public affairs), in an email interview.

Consultants suggest that Singapore Airlines will leverage the Tata joint venture to use India?s geographical advantage and service North America.

?In terms of aviation accessibility, India?s geographic location is comparable almost to that of the UAE?, says aviation consultancy firm Centre for Asia Pacific Aviation in a recent research note. ?Singapore Airlines could also potentially interline with Tata-SIA in Delhi to access the US East Coast, which it has struggled to do viably on a non-stop basis from Singapore.?

?Routings via Delhi are very efficient, with SIN-DEL-NYC being only 3.8% further than non-stop and Toronto being only 5.3% longer. This does not have the cachet of the Gulf carriers? non-stop to anywhere capability, but it may also enable Singapore Airlines access to smaller markets in the Middle East,? the CAPA research note said.

Consultants also expect Singapore Airlines? Star Alliance partners to enhance services to India with the Tata-SIA venture most likely to join the alliance. Star Alliance is the world?s first and largest airline alliance with 29 member airlines connecting 1,329 airports across the world.

?Currently, Star Alliance members have only 12.9% capacity share in India?s international passenger market, which they would be keen to increase once Tata-SIA starts?, an aviation consultant with a global audit and consultancy firm said.

GMR and GVK?s plans to develop New Delhi and Mumbai as a global aviation hub took a big blow earlier this year when India enhanced bilateral air traffic rights with Abu Dhabi and gave the capital of UAE nearly 50,000 seats per week. Fears arose that Abu Dhabi?s Etihad Airways along with Jet Airways, in which the Gulf carrier was investing, would take away India?s international traffic and use Abu Dhabi as a hub.

CAPA estimates international air passenger market to and from India to reach 100 million by FY21. This would mean an additional 35 million outbound passengers from India and 15 million inbound passengers to India. This additional traffic will be enough to fully utilise the international capacity at Delhi?s Terminal 3 and Mumbai?s Terminal 2?at 36 million and 40 million passengers a year, respectively.

Apart from Tata-SIA focusing on the full-service segment, other beneficiaries of the easing of international flying rules would be AirAsia India and GoAir. Aviation consultancy firm CAPA expects this to accelerate India?s potential of becoming a long-haul low-cost carrier hub for international air travel.

CAPA says this would require airport developers to pay attention to the factor while developing new airports. ?Possible developments such as the lifting of the 5/20 rule, the rise of long haul LCCs and the induction of Indian carriers into global alliances will have a significant impact on the airport traffic mix,? said CAPA in its report. ?International terminals that were primarily designed for full-service wide body operations will need to consider how best to accommodate the needs of a growing share of low-cost and narrow body operators.?

?The changing market structure in turn has implications for passenger mix, which influences retail spend and the need for facilities such as lounges and food and beverage outlets,? the report said.

AirAsia India, a joint venture between Tata Sons, Malaysian budget carrier AirAsia and Arun Bhatia is expected to start operations by early next year. AirAsia Group CEO Tony Fernandes has said that India is the final piece in the puzzle for the budget carrier?s Asia plans.

AirAsia India is expected to use Cochin as a hub for its international services, if the rules are eased and it is allowed to fly internationally immediately. This would come as a benefit for Cochin International Airport, which is currently being used primarily by Air India Express.

?Removal of the 5/20 rule would allow AirAsia to establish a base at Cochin, operating high traffic routes to the Gulf,? says CAPA. ?The availability of affordable and reliable air services between Kerala and the Gulf has long been an important objective for state politicians. If AirAsia delivers and expands aggressively this would be a body blow to Air India Express?which operates the majority of its capacity from Kerala?but would give wings to the growth plans of Cochin Airport.?