Modernisation of Airports

Biz@India

June 2015

Modernisation of regional airports like Jaipur has improved domestic and international connectivity

With merely a third of the 456 airports operational in India, the government is taking steps such as scrapping the airport charges to increase the regional air connectivity.

Tucked away at a corner in the southern state of Tamil Nadu, Tiruchirapalli International Airport (or Trichy), standing in the fraction of area of the airports in Delhi and Mumbai, was overlooked by the international carriers until 2012 when it became one of the fastest growing international airports. In 2012, the airport at Trichy was declared an international airport along with the Lucknow, Varanasi, Coimbatore and Mangalore airports. The international passenger traffic at the airport saw a growth of 382 pc between 2006-07 and 2012-13, three times more than the bigger airports such as Goa, Lucknow and Amritsar. With a growth of 2,899 tonnes, its cargo terminal ranked first among the non-metro airports of managed by the Airport Authority of India (AAI) in 2013.

Tiruchirapalli International Airport was among the 35 nonmetro airports selected by the AAI for development and modernisation in 2008. The others on the list included mainly state capitals and key Tier II cities such as Ahmedabad, Amritsar, Aurangabad, Agatti, Bhopal, Bhubaneswar, Chandigarh, Dehradun, Goa, Jaipur, Lucknow, Indore, Khajuraho, Madurai, Mangalore, Port Blair, Ranchi, Raipur, Rajkot, Trivandrum, Trichy, Udaipur, Varanasi and Vishakhapatnam. Modernisation of these non-metros included features such as new terminal building with modular design; structured steel with toughened glass glazing; vertical air-conditioning system; aerobridges with glass walls; walkways; in-line baggage screening for check-in; escalators; improved signages; integrated building management system; intelligent terminals; and improved traffic management on city side.

Check in counters at the modernised Tiruchirappalli Airport

Yet, of the 456 airports in India, only 33 pc are functional and most of them lost money. AAI plans to add another 100 to the list of working airports in the next five years and modernise all existing airports. While AAI has upgraded 35 regional airports so far, keeping aside INR 175 billion for the purpose. The objective is to increase connectivity and passenger traffic.

Connecting to the regional airports

As Indian states vie for more airports, in order to boost business and tourism, the AAI has sought free land and tax exemption among other freebies. Many states have subsequently agreed to provide free land for developing or extending the runway and exemption on municipal taxes. The federal government also instructed the state or local authorities to ensure water and power supply and proper road to enhance the air connectivity in tier II and III cities.

To boost air connectivity further in the remote areas notably the hilly states as well as the northeastern India, the civil aviation ministry proposed to waive off the landing, parking and navigation charges at 20-25 specified airports in 2014. In revised route dispersal guidelines (RDG), first notified in March 1994, the ministry recalibrated the capacity that the scheduled air operators need to deploy to connect the tier II and III cities.

In order to make the new airports appealing to the airlines, the ministry also identified 50 towns where it would offer 50 pc discount on night parking charges at the airports. This incentive is for the airports in the states that levy five per cent or less value added tax (VAT) on aviation turbine fuel (ATF).

Mysore Airport, developed at a cost of INR 820 million, started its commercial operation in 2010

Another step taken by the ministry, interestingly, allows the carriers or non-scheduled companies to purchase or sell miles (credits) to one another on regional routes. As the services on shorter routes within these regions are unviable for the large carriers due to competition from other modes of transport such as road and railways, this policy would allow the large carriers to purchase miles from the regional aircraft.

The ministry has proposed a cess, additionally, on passengers flying to metro routes to support the Essential Air Services Fund (EASF), meant to promote air connectivity in regional areas. This fund is supported by the government with the help of the state governments and AAI that proposes to pitch in from the profits of the PPP model airports. The fund may require a provision of INR 2.50-3 bn to support the connectivity in 40 Tier II and III areas.

Continuing its mission of modernising the regional airports the AAI also undertook INR 3 billion project to upgrade the Agartala airport, in the capital of the northeastern state of Tripura, to international standards by 2016. It will be the third international airport in the region after Guwahati (Assam) and Imphal (Manipur) and will be able to handle 1000 passengers per hour.

AAI also showcased 29 metro and non-metro airports to attract domestic and international airlines at the World Routes Development Forum in Chicago in September 2014. Among the airports that AAI focused on were Amritsar, Chandigarh, Jaipur, Lucknow, Leh, Srinagar, Varanasi, Bhubaneswar, Gaya, Kolkata, Port Blair and Ranchi.

Rehabilitation of airports at locations like Puducherry and Mysore have failed to secure connectivity

Work on five airports at Teju (Arunachal Pradesh), Jharsuguda (Odisha), Hubli and Belgaum (Karnataka) and Kishangarh (Rajasthan) was also likely to start soon, AAI told the foreign airlines and airports officials. The government plans to develop 50 low cost airports.

However, the plan to add 50 idle airports to 60 loss-making operational airports should be thought through, said a recent CAPA report. Especially when in recent years significant investments in rehabilitation of airports at locations such as Mysore, Puducherry and Kanpur have failed to secure airline services.

Marginal connectivity has affected the use of these airports that have been developed and upgraded to attract tourism. Puducherry, for instance returned to aviation map in April this year with Alliance Air, a subsidiary of Air India that would connect Puducherry to Bangalore. Alliance Air agreed to operate ATR type aircraft in this circuit that will accommodate 48 passengers all through the week except Wednesday. The airport that was upgraded in 2013 with the construction of new terminal was connected to Bangalore through SpiceJet that provided its service from January 2013 to January 2014 after which the airport was left idle.

Similarly Mysore, which was developed by AAI at a cost of INR 820 Million, started its commercial operations in 2010. Since Kingfisher Airlines, which was the sole carrier connecting the airport, withdrew its operation in 2012, the airport was barren. In January 2014 Mysore saw a resumption of airlink when SpiceJet launched flights connecting Mysore with Bangalore, Chennai, Delhi and Mumbai. However, the celebration did not last long as the carrier withdrew its services in October the same year.

Aviation and Aerospace consultant TJ Master told an Indian daily, “The state government’s approach of developing big airports with huge investments in Tier II cities is a flawed approach to promote intrastate connectivity. “

“What we need is small airports with 20 seater aircraft operating from it. This would be feasible not only for the airlines but also the airport operators,” he added.

“One of the reasons why the governments public-privatepartnership model to develop airports in the state has failed is due to this reason. You cannot make an investment of INR 2-2.5 Billion and expect quick return in the aviation sector. There is an on-going expenditure in terms of security, maintenance and staffing,” said Master.