The next six months could see more than a handful of regional airlines start flying as the government is set to approve several carriers connecting small cities and towns within a region, says minister of civil aviation Praful Patel.
But the ministry’s preference for regional models will not necessarily hamper ambitions of those firms planning to start nationwide services.
“We will examine the business plan, we will open up progressively if there is a strong carrier...if tomorrow the Tatas want to start an airline, we will be happy to support it,” Patel told Mint in an interview.
While the minister is keen on such airlines, smaller airlines flying regional routes may not be a viable proposition in the long haul, an analyst said. “No one is happy doing just one route. They will all get acquired at some point of time or they will have some partnership,” predicts Ram Badrinathan, a New Delhi-based senior analyst with PhoCusWright Inc., a US travel consulting firm. “Because, you will anyway compete with the larger ones.”
Patel said he expected airport infrastructure, bursting at the seams handling air traffic that has nearly doubled in two years to 33 million by the end of 2006, to be able to accommodate the fast-growing number of flights. While airports at New Delhi and Mumbai have already been leased out for 30 years to private developers and new airports are being built in Bangalore and Hyderabad, Patel said the unexpected growth in the sector requires further liberalisation.
“If you minus one Mumbai (airport) out, by next year you will have the whole country’s airport infrastructure progressively coming up by next year. All 35 non-metros and other smaller airports will roll out by 2008,” he said. Bangalore and Hyderabad airports are expected to start operations before April next year.
But the expansion of the Mumbai airport, which is witness to the highest number of passengers every year, has been running behind schedule facing expansion difficulties owing to land encroached by slum settlements around it. It is expected to miss the 2010 deadline for the first phase of modernizaton, which included construction of a third runaway by more than six months.
Results of a new navigation study by US’ MITRE Corp. will help restructure flight operations at the crowded Mumbai airport and enable its use round the clock.
But with no land for expansion at the current Mumbai airport, Patel has his hopes pinned on the proposed Navi Mumbai International Airport project, which has been approved by the Union cabinet last month. The project, he said, will be “double fast-tracked” and will start operations by 2011 to help handle air traffic into the Mumbai megapolis. The current Mumbai airport, which handled more than 20 million passengers between April 2006 and February this year, is expected to be saturated by 2013 even after modernization, the ministry has forecast.
To help finance airport expansions elsewhere—projects in both Chennai and Kolkata are being funded by the government, the civil aviation ministry has proposed that the state-owned airports regulator and developer, Airports Authority of India, or AAI, be allowed to raise capital, but will stop short of an initial public offer of shares, Patel said.
“With four-five major airports out of the way, AAI is in a position to finance the rest of the airports through internal acruals and limited borrowings,” he said. “But as things look, we will borrow very little. AAI can spend up to Rs10,000 crore as a combination of internal accruals and reserves, which is good enough for the next three-four years for the 35 non-airports and for Kolkata and Chennai airport’s first phase.”
On state-owned carriers Air India and Indian Airlines, Patel said the ministry, in order to protect market share, plans to place orders for more passenger jets even before deliveries of the more than 110 planes that the combined carriers are purchasing are complete.
“They have to look at more fleet, buy more aircraft or lease or whatever. Even after buying the 111 aircraft, we still feel by 2011-12 the airline will not be having any incremental capacity (because the old planes will be phased out). It will be a huge requirement...,” he said. “Don’t forget that even if you order planes today, the earliest delivery is not before 2013.”
Air India Ltd and Indian Airlines Ltd will legally merge by the end of this month under National Aviation Co. of India Ltd, forming the fourth-largest fleet in Asia.
But even this enhanced fleet size will not capture more than a fifth of the international traffic—outbound as well as inbound—of India, therefore necessitating more private carriers on such global routes, Patel said, adding that his ministry was working out norms to allow non-state-owned airlines to fly internationally even if they have not completed a minimum five years of continuous operations as mandated under aviation rules in place since 2004.
Only Air India, Indian Airlines and the Jet Airways (India) Ltd-Sahara Airlines Ltd combine are currently permitted to fly international routes.
“We have figures for the next five years of how many planes Air India and Jet Airways (together with Air Sahara) can get,” he said. “In a five-year scenario, again, the figure does not exceed 25% (of international traffic). So, if 75% share is still going to be taken by other carriers of the world, then why not open up the sector for private carriers.”
Permissions to fly international routes will continue to be granted on a case-by-case basis and a group of ministers tasked with finalizing a new aviation policy will “take a final view” before the year-end, Patel added.
The minister also spoke about his efforts to lobby other ministries to reduce taxes and duties on ATF, which yo-yos as much as 80% depending on the state in which airline companies buy fuel. Patel said there is a realization in the government that high ATF prices are not sustainable for the aviation sector.
“We will keep putting pressure or find other ways,” he said. “There is no monopoly for my carrier (Air India), then why should there be a monopoly of oil PSUs? We just can’t have high ATF prices,” he said, adding that the ministry may allow carriers to import ATF from abroad and relax hedging norms further.