Budget 2018: The Union Budget 2018 has focussed on expansion of airport infrastructure as well as growth of airlines. Constrained airport capacity is the biggest challenge to air traffic growth in the country that is projected to cross the 150-million mark in FY19.
Budget 2018: The Union Budget 2018 has focussed on expansion of airport infrastructure as well as growth of airlines. Constrained airport capacity is the biggest challenge to air traffic growth in the country that is projected to cross the 150-million mark in FY19. The first phase of airport modernisation is over, with Mumbai, Delhi, Hyderabad and Bangalore airports having been privatised. However, the second phase of airport capacity expansion is stuck, due to poor planning, and land acquisition and licensing issues. Minister of State for Civil Aviation Jayant Sinha has said aviation planning in India needs to look 15-20 years ahead and not on a short-term basis, as the latter has resulted in saturation of airport capacity and unavailability of slots for adding capacity.
The thinking in the government is that entire processes and government machinery mechanisms like parking bays, air space, slots, terminal capacity and also multi-modal capacity to carry passengers to airports need to be directed towards a billion flights per year in 10 years’ time and airports need to be prepared to handle such traffic. Significantly, airlines in India are projected to add 124-130 planes in FY19 alone. The announcement by the finance minister of NABH-Nirman, a new initiative that would target a five-fold increase in capacity at 124 AAI airports, is a step in this direction. A proposal to leverage the balance sheet of the Airports Authority of India (AAI) would help the government raise easy, quick and cheap money and add capacity quickly through upgrade of existing airports.
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Since the AAI has not been corporatised till now, the government can only leverage its balance sheet to raise money. “The AAI has nearly Rs 2,200 crore in profit and it is easier for the government to raise funds against its balance sheet at a much lower rate of about 8% or, if negotiated hard, even at a lesser rate, given that banks trust AAI,” said an industry expert, adding that AAI itself had not been able to utilise its resources for either funding new airports or getting the existing ones upgraded. Aviation body International Air Transport Association (IATA) has said that its projection of India being the third largest aviation market globally by 2024 is contingent upon its airport infrastructure and capacity growth. “To make this a reality, airport capacity in India needs to be augmented and expanded quickly. IATA has earlier recommended and is supportive of AAI’s balance sheet being leveraged for infrastructure creation and expansion,” said Amitabh Khosla, country director, IATA.
Low-cost airline SpiceJet said the scheme has the potential of pushing the number of AAI airports from 124 to 700, an increase of 464% . “The initiative will help connect smaller cities and increase tourism and economic activity like never before,” said Ajay Singh, chairman and managing director, SpiceJet. The other initiative mentioned in the Budget 2018 is the Regional Connectivity Scheme (UDAN) that aims to make the common man’s flying dream come true. Big players like IndiGo and SpiceJet bid for regional routes aggressively in the round that concluded recently. The scheme aims to connect 56 unserved airports and 31 unserved helipads in the country. Of these, 16 airports are already operational.
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Industry experts, however, remain watchful as only 12% of the country’s total aircraft fleet is presently deployed on regional routes. Unless aircraft suited for regional routes fly these routes in big numbers, the idea of linking metros to non-metros would remain largely underachieved, they say. Industry estimates say that 90% of the top 40% routes are connected only to metro airports, and for Udan to be successful, a concrete push with regard to aircraft suited for regional routes needs to be made.