Five steps to give aviation a stronger lift amid rising air traffic

Airports’ capacity augmentation, internationalisation of airlines, regional linkage can boost the sector.

New Delhi | Updated: May 30, 2018 2:19:47 am
Five steps to give aviation a stronger lift amid rising air traffic In 2016, the government drew up the National Civil Aviation Policy and the UDAN (Ude Desh ka Aam Nagrik) to connect under-served regions.

Written by Jagannarayan Padmanabhan

The laws of physics state that to generate lift, the wings of a plane must divert a lot of air down, or create a ‘downwash’ gusher. Metaphorically speaking, since the early 1990s, downwash from regulatory facilitations and rising income levels helped India become the No. 3 domestic civil aviation market in the world.

But here’s the stunning perspective: 95 per cent of the country’s population, or over 100 crore people, hasn’t still flown in an airplane. In February, domestic passenger load factor crossed 90 per cent for the first time. Airbus estimated domestic passengers to multiply six-fold over the next 20 years.

In 2016, the government drew up the National Civil Aviation Policy and the UDAN (Ude Desh ka Aam Nagrik) to connect under-served regions. Now, this rapid growth has caused many air pockets, and five facilitations have become quintessential to smoothen the flight path to future:

Solve the looming capacity crunch
Several major airports are operating near saturation levels. Capacity augmentation, therefore, needs to be pursued on a war footing. Estimates suggest investments of over Rs 3 lakh crore would be needed over the next 15-20 years. The Airports Authority of India (AAI) intends to seek a term loan of Rs 1,500 crore for capital expenditure (capex) starting this year, but that’s hardly ripple given the requirements. In the context, going for public private partnerships (PPPs) — the driving force of airport infrastructure development in recent times — would be necessary and the faster ecosystems for this are facilitated, the better.

Nurture regional connectivity
Although the UDAN scheme has taken off with a few of the routes operationalised, there are several others where services have not yet begun. It is important to ensure that there is an adequate oversight of post-bidding outcomes. It is also important to prioritise unserved airports to be invested in, particularly routes with higher demand.

The introduction of seaplane services, certainly a novel idea, can be expected to further bolster regional connectivity. However, for the seaplane segment to take off, dedicated pilot training facilities are needed. As is rigorous due diligence to site landing locations since seaplanes can’t be operated from all types of water bodies.

Privatise prudently
Augmenting capacity and enabling regional connectivity need capex, regardless of the PPP mode. It, thus, makes sense to direct government attention to physical development of airports, rather than the operations and maintenance (O&M) requirements of the existing ones.

O&M needs can be addressed through the PPP mode. This would spawn a steady income stream to the public authority, which can be channelled to meet new capex. Yet, experience abroad suggests full privatisation of O&M does not always bode well for an airport. A case in point is the Heathrow airport in London. Despite having world-class infrastructure, it had come to a standstill in late 2010 following a severe snow storm because its Spanish operator had focused more on leveraging retail floor-space than invest in snow ploughs.

The repeated bid invitations by the AAI for O&M of Jaipur and Ahmedabad airports since 2017 are suggestive of disparities between the expectations of the authority and the bidders. Eventually, a cost is transmitted to the end user, whether the passenger or the airline operator. Hence, it is important to ensure a balance is struck between the interests of the user, the private player, and the authority.

Internationalisation
Today, 38 per cent of travellers flying to and from India board domestic carriers. With the introduction of the ‘0/20′ rule in 2016, which mandates domestic carriers to have a minimum fleet size of 20 aircraft to be eligible to fly abroad, a big opportunity is there for the take-off.

The low-cost model, which has been the cornerstone of success for the likes of IndiGo and SpiceJet, is also cruising abroad. A report by The Economist said full-service carriers’ share of London-New York traffic is expected to dip to 90 per cent this year from over 98 per cent five years ago, as low-cost carriers win more flyers.

Build indigenous tech capacity
Currently, close to 90 per cent of the maintenance, repair and overhaul (MRO) work of domestic carriers is done outside India. Considering Boeing’s forecast of plane demand in India of 2,100 over the next 20 years, significant cost competitiveness can be had if MRO was done in India.

The writer is director and practice leader (transport and logistics), CRISIL Infrastructure Advisory

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