Flying into headwinds

On the face of it, Udan looks like a neat plan. But there are some flies in the ointment

In October last year, I was happy to hear the news on the telly about a spanking new airport at Pakyong, near Gangtok, in Sikkim. My wife and I had made the somewhat arduous journey to Gangtok back in 1996, taking an overnight train to New Jalpaiguri from Kolkata. And then enduring a five-hour uphill bus journey from Siliguri to Gangtok, past the meandering emerald green waters of the Teesta. 

I’ve always wanted our family to visit Sikkim—and the prospect of a direct flight from Kolkata was alluring. The airport is, in many ways, an engineering marvel. Perched between the Himalayan ranges at 4,500 feet above sea level, the land for the airport was carved from a mountainside using modern engineering methods. Built at an estimated cost of Rs 605 crore, the airport is expected to boost tourism, trade and commerce, and connect the North-Eastern region to the rest of the country and also to neighbouring countries such as Bhutan and Nepal. 

But what’s more important is that it is also an important test case for Udan, India’s game-changer in the civil aviation space. Launched with much fanfare in October 2016, Udan’s mandate is to build both greenfield airports and restart defunct airports in far-flung locations, and open up new air routes that address the issue of regional connectivity, in order to make air travel accessible for all Indians. Hence, the acronym Udan. Or, Ude Desh Ka Aam Nagrik.
 

A new breed of regional airlines and existing mainline airlines would bid for these new routes and the winner would enjoy exclusive access for three years. And by capping the price of half the inventory of seats, airfares would remain affordable. And this would be achieved by creating a viability gap fund for the airline operators, through a combination of a cess imposed on the tickets in the main routes. Plus, there would be certain tax concessions in ATF fuel from both the Centre and the states—and waivers of landing charges from airport operators.

On the face of it, it looks like a neat plan. But there are some flies in the ointment. Consider a few key ones:

• Building a greenfield airport isn’t enough, unless flights are able to take off and land. Inclement weather conditions make it difficult for flights to land in Pakyong on most days. And the airport does not have the somewhat expensive instrument landing systems (ILS) in place. Cancellations are therefore common. And the repeated cancellations make it difficult to build traffic on the route on a sustained basis. Most people end up flying to the nearest Bagdogra airport, which has an ILS in place, and then driving up to Gangtok. How that will make the Pakyong airport sustainable is anybody’s guess.

• While the infra challenge might be easier to fix, the bigger challenge is putting in place an ideal network design. The key is to discover routes where there is sustained traffic, not just in a few months of the year, but all round the year. That’s why it is far easier to generate steady, predictable traffic, by following a hub and spoke design by connecting the large metro airports to the new Udan routes, as opposed to a point-to-point service say, from Jalgaon to Indore. India’s metro airports, Mumbai, Delhi and to a large extent, Bengaluru are choked. They have run out of capacity in terms of landing and parking slots. To make matters worse, passenger traffic continues to gallop at nearly 18-20 per cent every year. And the existing airlines have responded to the market demand by ordering aircraft that could almost double the existing aircraft capacity in another three years. This will stretch India’s airport capacity in the metros even further. And the biggest casualty will be the Udan routes, for which the airport operators are expected to waive off landing and parking charges. They reluctantly agreed in the first two years, but now, they’re asking for a share of the viability gap fund.

• Take for instance, the Durgapur-Delhi Udan route that Air India resumed last year, after a gap of two years. The traffic has been strong from the steel and mining centre, given that earlier passengers had to travel all the way to Kolkata for a flight to Delhi or rely on the more time-consuming train service. Most businessmen prefer to fly to their destination, wrap up their work and preferably return the same evening, thereby saving money on hotel accommodation. Initially, the Delhi airport was able to offer a flight to Durgapur at 4:30 AM (which meant passengers would have to check-in around 3:30 AM), but later, after much persuasion, settled for a 5:50 AM departure. Finding convenient time slots will be a challenge. Because the number of runways isn’t increasing (except to some extent, Delhi, which will have a fourth runway in the next two years.) Things could improve a wee bit once new airports come up near Delhi (Hindon and Jewar) or Mumbai (Navi Mumbai), but the capacity will still possibly lag the growth.

• While IndiGo and SpiceJet have made headway, the new regional airlines have faced a major challenge connecting the two key metro airports to the new Udan routes since they don’t have pre-existing slots in Delhi and Mumbai. No wonder Air Odisha and the relaunched Air Deccan were stripped off their licenses on Udan routes in November when they were unable to start operations for more than a year.

By all indications, it is a complex problem to solve. And hopefully, one that, as a former McKinsey partner, the minister for state for civil aviation Jayant Sinha, might relish. 

The writer is co-founder at Founding Fuel