Air India shouldn’t fly past North East

December 25, 2019 12:45 AM

The privatisation of Air India poses a challenge of integrating the North East with the rest of the country, and retaining air connectivity in the region.

air india, north eastAs the privatisation or shutdown deadline for Air India nears, connectivity to the North East cannot be overlooked.

By Satyendra Pandey

As the deadline for the privatisation of Air India approaches, much is afoot. This includes union opposition, a lack of investor interest, and an NCLAT judgment for one of Air India’s suitors. The government, however, is firm in its resolve. After all, Air India continues to bleed, with no respite in sight. Its FY19 loss was Rss 8,556 crore; FY20 will likely be worse. This, after the government infused `17,320 crore of taxpayer money over the last five years. Needless to say, the situation is unsustainable. Yet, in the rush to privatise, the connectivity to the North East may have been overlooked.

India’s NorthEast (NE) comprises of the states of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, and Tripura, also known as the seven sisters. An ethnically, culturally, and geographically diverse region, the NE is connected with the rest of the country through a narrow corridor of approximately 21 kilometres. Within the NE, connectivity initiatives are underway, the most famous being the Bogibeel bridge that connects Dibrugarh to Dhemaji, supplementing the Kolia Bhomora Setu. However, such projects have long gestation periods, and are focused on intra-regional connectivity. Air connectivity, therefore, continues to be the fastest and most economical means.

This connectivity challenge was partly addressed by the poorly thought-out Route Dispersal Guidelines (RDGs). But, in a classic case of intent versus impact, airlines started plying on these routes for compliance rather than connectivity. As such, most airlines include routes that had high demand—Srinagar, Jammu, Guwahati, and Bagdogra—in their network. The structure of the network can be adjusted to ensure compliance.

When this did not work, the government, in 2016, launched the regional connectivity scheme UDAN. This included subsidies for NE routes. However, there have been few takers. In the four iterations of UDAN, UDAN-1 did not have any routes in the NE; UDAN-2 connected Tezpur, Jorhat, Lilabari, and Pakyong (Tezpur and Pakyong operations have since ceased); UDAN-3 connected Lilabari, Guwahati, Imphal, and Dimapur route, but all have been loss-making; and UDAN-4 has six airports from the NE listed as priority areas, and an additional 23 unserved airports. Several airlines have attempted to start operations in the NE, but without much success.
Airlinks are critical to the NE from a strategic and development perspective. Air India currently has 289 daily flights servicing 57 domestic destinations. These include seven cities in the North East. Alliance Air, an Air India subsidiary, has 111 flights daily, servicing the seven destinations in the North East. These include Guwahati, North Lakhimpur, Tezpur, Pasighat, Imphal, Shillong, and Dimapur. Some of the Alliance Air flights are operated under an MoU with the North Eastern Council (NEC) and get funding support. Interestingly, Alliance has not turned a profit for several years, and most recent estimates peg its losses upwards of Rs 250 crore.

The NE flights, for the most part, are loss-making due to cyclical demand, irrational cost structure, and low passenger volumes. In the event of a sale of Air India, any buyer will almost certainly revisit the airline network; the NE routes, which all estimates indicate are operating at a cash-loss, will surely be pruned. Airports that will lose connectivity completely include Lakhimpur and Tezpur in Assam, and Pasighat in Arunachal Pradesh. In others, such as Shillong and Mizoram, private operators like Indigo and Go Air will gain a monopoly status, which will impact pricing.

This poses a challenge for the government because the North East needs to be integrated with the rest of the country—this has been a core focus area politically, socially, and economically. The focus, thus, is enhanced, rather than reduced, connectivity.

As the privatisation or shutdown deadline for Air India nears, connectivity to the North East cannot be overlooked. And, this may force a revision of sorts.

Former advisor, Centre for Aviation (CAPA). Views are personal

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Lenders defeating the IBC’s spirit
2Auto PLI adds force to the EV wave
3Not a time for booster doses