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Dassault Aviation Bullish on Future of Indian Bizet Market

India stands out as a country where high-rise buildings sit cheek-by-jowl with hovels, while in the bustling streets the well-heeled rub shoulders with the homeless. It’s no different with commercial aviation. Most domestic flights depart from an impressive steel-and-glass terminal in one of the metros or emerging mini-metros and arrive at an equally imposing steel-and-glass terminal in another metro or emerging mini-metro. Since airlines are formed to make money this is eminently sensible, because it’s in the large population centres that passengers are plentiful. However, most analysts believe that the full potential of the country’s aviation sector can only be realised if regional connectivity is vastly enhanced. Yet, periodic attempts to take aviation to the masses have met with scant success. Many Tier-II and Tier-III cities and towns have functional airports but suffer the ignominy of inadequate or non-existent air links.

The reasons for the current woes of the country’s airline industry are well known. The airlines bear much of the blame because over-aggressive fleet expansion in boom times has left them deep in debt. Cut-throat competition also puts severe pressure on yields. But what about factors beyond their control, like policy and regulatory confusion, a high-cost environment and inadequate infrastructure? Scarce finance and shortage of trained personnel are other major hurdles in the industry’s quest for growth. These are even more hurtful to regional aviation. Every few months the industry is offered some new reform to help it increase flights to the hinterland. However, unless these measures are part of a well-considered and comprehensive new civil aviation policy, they are doomed to fail.

Regional Rumblings

The regional aviation policy of August 2007 issued by the Ministry of Civil Aviation (MoCA) sought to encourage small start-ups to link Tier-II and Tier-III cities to the nearest metro, and offered several concessions to facilitate regional connectivity. The professed hope was that this would spark a regional aviation revolution in India. However, as it turned out, neither were the incentives enough to make regional flights economically viable, nor did the policy insulate the newcomers from fierce competition from the major airlines.

Over the years a couple of dozen companies did consider floating regional airlines and several went so far as to obtain NOCs from the MoCA. MDLR Airlines was launched in March 2007 and operated three Avro RJ70 regional jets connecting Delhi with eight destinations. It had to quit in November 2009 because it could no longer meet lease payments. Air Mantra commenced operations in July 2012 with two 19-seat Beechcraft 1900D turboprop aircraft connecting Amritsar, Chandigarh and Jammu. However, demand was dismal and it shut shop in April 2013.

The regional space, to some extent, is filled by the spare effort of the major airlines. But their heart is not in it. They feel that flying to remote destinations means low yields and find it difficult to cover costs. For the record, SpiceJet operates a fleet of 15 Bombardier Q400 NextGen turboprop aircraft and Jet Airways deploys 18 ATR 72 turboprops, some on regional routes. Air India’s wholly-owned subsidiary, Alliance Air, has decided to lease eight ATR 72- 600/500 planes and touch smaller cities. All these add up to an unsatisfactory number.

Yet, once again, there are stray signs of hope for regional aviation after Air Costa launched operations in October 2013. The Vijayawada-based regional carrier links underserved markets with direct flights using a fleet of two Embraer E-170 and two E-190 regional jets. It operates flights to Ahmedabad, Bengaluru, Chennai, Hyderabad, Jaipur and Vijayawada; while Visakhapatnam, Madurai and Coimbatore and other destinations are on the cards. Air Costa recently signed a firm order agreement with Embraer for 50 E-Jets E2s with an additional 50 purchase rights. However, the airline intends to apply for a pan-India licence shortly, which would again leave the country without a dedicated regional carrier.

Although India has a large number of airports (estimated at over 450) most are currently unusable. There are around 93 functional airports, including six run by private operators, plus 28 civil enclaves at military stations. However, only about 70 airports currently attract regular commercial flights. The six metros alone account for about 70 per cent of domestic passenger traffic. For the foreseeable future, turboprop aircraft will be crucial to enhance regional connectivity because land acquisition and environmental issues mean that even new airports may have to be content with short runways, inadequate for Airbus A320 and Boeing B737 jets. Land acquisition hassles also add to project costs and affect financial viability.

In the absence of dedicated regional airlines the government compels the major carriers to touch more destinations through the infamous Route Dispersal Guidelines (RDG). According to the RDG, all scheduled operators are required to deploy a specified percentage of their trunk route capacity onto routes that link remote and smaller cities and towns. Naturally there’s a noticeable lack of enthusiasm because the airlines do not find such routes to be commercially viable. (To be Continued in Show Daily 2)

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