Jabalpur, Belgaum, Nanded…airlines are narrowing down their reach as the booming aviation industry explores uncluttered territory in smaller, non-metro cities.
So if you have SpiceJet recently ordering 15 Bombardier short-haul aircraft worth $446 million for a bigger regional play, distressed state carrier Air India is planning a turnaround strategy by connecting non-metros and enhancing regional connectivity. Others are in the line too, with Kingfisher Airlines and GoAir looking to strengthen their domestic network in smaller cities.
Domestic airlines carried over 468 lakh passengers during January-November 2010, registering a growth of 19% over 394 lakh passengers in the corresponding period in 2009. However, around 40% of India?s air traffic is still on the busy Delhi-Mumbai route, with around 150 flights per day. Compared to this, most non-metro airports, numbering around 100, have less then 10 flights per day?underscoring the huge potential that lies in connecting India?s smaller cities and metros.
Amber Dubey, director (aerospace & defence) at consulting firm KPMG, furnishes two reasons behind this trend. ?Airlines have emerged from the slowdown and profits are now trickling in. Moreover, it makes sense for carriers to connect more non-metro cities as trunk routes are getting choked and fares and yields are tight on these routes. The next big growth will come from tier-II cities and the aviation industry knows that,? he says.
Of course, the trend is also driven by demand in smaller cities. The buoyancy in demand and high load factors that the aviation industry is now witnessing are not only limited to busy metro routes and there has also been a strong demand for air travel from smaller business hubs.
Low-cost-carrier GoAir?s CEO Kaushik Khona points out that their flights connecting Nagpur and even a small town such as Nanded have been witnessing nearly full loads (100% occupancy). ?We are evaluating more tier-II and III cities for expansion, though immediately we cannot expand looking at slot constraints. But there is a huge growth opportunity that lies in connecting non-metros,? he admits.
Air India is also strategising to make the most of this opportunity. ?Focusing on regional operations by introducing intra-state routes and more focus on non-metro cities is very much part of the turnaround plan, but since the plans are not finalised yet, it?s too early to comment on routes and type of aircraft,? says a senior Air India official. The civil aviation ministry will review the turnaround plan by month end. Air India registered an operating profit of Rs 21.7 crore in November 2010, with over half of its flights recording cash profits.
Travel conglomerate Bird Group?s ED Ankur Bhatia agrees that tapping regional routes translates into 200 million more passengers, which is definitely a big potential market. Dubey of KPMG argues that for existing airlines, it is not a bad idea to focus on regional connectivity, as they have the ?critical mass? compared to a start-up regional carrier. However, Bhatia has a different opinion. ?In a bid to get more market share, carriers are looking at tier-II and III cities and are also eyeing regional operations. But for existing carriers, it?s not a very viable model to connect trunk routes using bigger aircraft and have smaller aircraft as well for regional routes. Such a model has not worked for airlines globally,? he says.
However, regional carriers that were suppose to connect metros with other cities have failed to take off in Indian skies despite the grant of licences. While regional carrier Paramount Airways had to discontinue operations after it got embroiled in legal wrangle that ultimately led to the suspension of its permit by the Directorate General of Civil Aviation (DGCA) last year, another regional carrier operating in North India MDLR Airlines operated hardly for six months and shut operations owing to the slowdown in economy and lower margins.
Meanwhile, around half a dozen regional start ups such as Indus Air and Air Dravida that had sought licences from DGCA are waiting in the wings. While some cite infrastructure bottlenecks others wanted to wait and watch as the recession set in soon after the regional airline policy was passed. Now that the traffic is looking up, these airlines are planning to restart operations. Delhi-based Jagson Airlines has firmed up it’s plans to start scheduled operations in North India and Paramount Airways is set to restart operations after a Madras High Court order going in its favour.
Small aircraft manufactured by companies like ATR, Bombardier and Embraer are used on short-haul routes. As per estimates, the Indian aviation industry is expected to take delivery of 600 commercial regional aircraft like Bombardier and Embraer in the 20 to 149-seat category over the next two decade, indicating a robust growth in short-haul routes.
Upgrade and development of non-metro airports is also set to give fillip to the regional routes. According to the Airports Authority of India, development of 58 airports in the country has been taken up including 35 non-metro airports and 23 airports in tier-III cities. Of these 58 Airports, work has been completed at 27 airports, which includes Port Blair, Kullu, Hubli, Belgaum, Cuddapah, Shillong (Barapani), Cooch Behar, Akola, Gondia and Pant Nagar among other airports. Centre for Asia Pacific Aviation in one of it’s reports points out that traffic has been soaring at India?s tier-II airports, the non-metros, where extensive modernisation and expansion projects are under way to cope with rising demand.
While the initial plan was to upgrade all airports by 2009, due to the slowdown in traffic related to the global economic recession and funding constraints, completion was delayed. The revised target is to have the modernisation of all 35 airports completed by 2012. Of the total 115 airports in the country, 12 are international airports.