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Why bringing Tier 2 and 3 cities into th

  Apr 06, 2017

Why bringing Tier 2 and 3 cities into the aviation map is a project long overdue?

A major reason for the poor regional air connectivity in India is that airlines do not find it lucrative to operate from small cities.
  • Shimla, Bathinda and Jaisalmer have airports. But they are not in use.
  • The airport in Kullu gets only two flights a day.
But things are poised to change with the government’s UDAN (Ude Desh Ke Aaam Nagrik) scheme.
  • Five airlines have won bids to operate 128 routes, that will connect 70 airports including 31 unserved ones like Shimla, Bathinda and Jaisalmer, and 12 underserved airports like Kullu.
  • According to the Civil Aviation Ministry, the first flight under UDAN is expected to start later this month.
  • Bringing Tier 2 and Tier 3 into the country’s aviation network is a significant development in a country where 80 per cent of air travel is between the metros — in fact, the Bombay-Delhi sector accounts for more than 50 per cent of domestic flyers.
  • The scheme will foster regional connectivity, make businesses and trade more efficient, enable medical services and promote tourism.
Poor Regional connectivity
A major reason for the poor regional air connectivity in India is that airlines do not find it lucrative to operate from small cities. The government has tried to address this concern by an adroit combination of subsidies and fare caps.

  • All the airlines that participated in reverse bidding for the subsidy accepted the fare caps set by the government. The money for the subsidy will be raised through a levy on flights operating on major routes like Delhi and Mumbai.
  • The government expects an annual corpus of Rs 205 crore from this levy. Funding this corpus could mean a levy of around Rs 50 for a passenger on flights on major routes. The subsidy will be in place for three years for an airline that has won the bid on a UDAN route.
  • There will be other benefits, including no airport charges — a significant incentive given that airline operators often complain that airport expenses constitute 25 per cent to 30 per cent of their operating costs.
  • The most heartening aspect is that these include six proposals for 11 routes that don’t seek any subsidy under the scheme, proving there is an untapped economic potential.
  • The benefits for tourist hotspots such as Agra, Shimla, Diu, Pathankot, Mysuru and Jaisalmer — that would now be just a short flight away, replacing cumbersome road or rail journeys — are obvious.
  • But the significant multiplier effects of aviation activity, including new investments and employment creation for the local economies of other destinations could be equally profound. Provided this model is sustainable and more regional flights come up under the scheme, the availability of slots at larger airports that would emerge as hubs could become an issue — particularly at capacity-constrained airports such as Mumbai. The second airport at Navi Mumbai may help ease congestion, but that is still years away. In cities where new airports have been developed, such as Bengaluru, abandoned old facilities could be revived as dedicated terminals for low-cost and regional flights.
  • Separately, new no-frills airports must be encouraged where traffic is expected to hit saturation point in coming years.
  • Recently, four new foreign investors and a few domestic players have expressed interest in managing operations at state-run airports such as Jaipur and Ahmedabad. This marks a revival in investor interest after a long lull.
  • The new policy is, however, not without challenges. For example, there are fears that a flight from an UDAN location will be low priority for air traffic controllers in big cities.
  • Airports in many Tier 2 and Tier 3 cities do not have big runways, so they can’t take regular aircraft. That means airlines will need to induct smaller aircraft for short takeoffs and landings. Such aircraft needs specialised crew. India produces 200 to 300 pilots every year, and it’s safe to say that training specialised crew will take time.