New Delhi: Kirti Vyas is a sought-after travel agent in Raipur, the Chhattisgarh capital and home to over 1 million people. Rapid industrialization in the past decade has made the city prosperous, and Vyas now sells six times the number of air tickets he used to eight years ago.

Home to power plants and steel factories, Raipur is now connected by 32 daily flights offered by IndiGo, Air India and Jet Airways, compared with just eight flights a decade ago.

“Business is booming. You will see a week before travel, flights from Raipur are totally empty," said Vyas, 55. “Then two days before the flight, it will be totally full. Passengers don’t ask us what is the ticket price, but if there are seats available."

Most of these flight additions are to metro cities like Mumbai, Delhi, Bengaluru and Chennai. Flights to non-metro cities like Ranchi in Jharkhand, Jaipur in Rajasthan, Pune in Maharashtra and Kochi in Kerala are in great demand too, says Vyas, who sells around 125,000 tickets a month.

Connecting small cities like Raipur and Ranchi is the thrust of the new civil aviation policy announced by the government in June. The regional connectivity plan proposes a small cess on flights operated mostly on busy routes to create an annual corpus of 500 crore that will subsidize flights using small planes on unserved or underserved routes.

Apart from trying to promote regional connectivity, the new aviation policy partially scrapped the so-called 5/20 rule, which restricted overseas operations to only those airlines that had five years of domestic flying experience and a fleet of at least 20 aircraft. New airlines like Vistara and AirAsia can fly abroad once they achieve the mandatory fleet strength.

The policy also proposed to revive World War era airstrips with a corpus of 500 crore that is being set up. The aim is to bring fares down to as low as 2,500 for one-hour flights.

It also proposed to revive the aircraft maintenance business in India by making it easier for companies to get permissions from government agencies, and to create a scheme to equip pilots with training on specialized aircraft.

“Regional connectivity is the cornerstone of our civil aviation policy. It shall promote affordable flying and balanced regional growth," civil aviation minister Ashok Gajapathi Raju had said.

The plan will work this way: airlines will be asked to bid for flights on underserved routes proposed by the state. Fares on some of the seats on these flights will be capped to offer cheap travel. The cap will be based on the distance; for instance, a ticket on a flight between Delhi and Bhatinda (Punjab), 324km, will cost 2,010.

Finance minister Arun Jaitley has announced that his ministry will release funds to operationalize existing, unused airports to help connectivity. On paper, it could spawn hundreds of new flights.

Yet, the success of the new plan will depend on how far the civil aviation ministry is able to follow Prime Minister Narendra Modi’s goal of improving the ease of doing business, experts said. “I give it (new aviation policy) a 10 on 10," said G.R. Gopinath, who founded Air Deccan, the first Indian low-cost carrier, in 2003 and sold it four years later to Vijay Mallya’s Kingfisher Airlines Ltd, itself grounded in 2012. “But reforms have to continue."

So far, the drive to improve regional connectivity by linking small towns has been led by state-owned Air India. Smaller airlines have come and gone without making an impression on the network.

In the state of Himachal Pradesh, charter operator Air Himalaya started flights with a 12-seater Grand Caravan plane three years back. Its flights connect the hill stations of Shimla and Kullu to Chandigarh, said an executive at the airline who declined to be named.

However, the Directorate General of Civil Aviation (DGCA), which regulates the industry, allowed it to fly only nine passengers per flight, resulting in a loss of revenue on three seats. There were also restrictions on how many landings this aircraft could do on a particular surface.

It is difficult to eke out a profit from such operations. The cost of leasing a Grand Caravan plane for an hour is about 60,000 with cabin crew and pilots. Fuel costs are additional. To ensure viability, Air Himalaya has to fill at least eight, if not all the nine, of the seats it is allowed to offer.

Salaries for pilots and engineers, among the highest paid personnel at an airline, are the same for Air Himalaya as they are for IndiGo, which flies 180-seater Airbus A320 planes.

On top of that, while flights on some sectors make sense, others don’t. Even with fares of 6,000 for Chandigarh-Kullu and 8,000 for Kullu-Chandigarh (which sees greater demand), it’s difficult to make a profit. Chandigarh-Shimla, a 15-minute flight, is run on a discount of 2,500 per ticket, given the route can be covered by a drive that takes three and a half hours on a scenic route. And then there is the dicey weather in the hills. If the single-engine plane turns back because of bad weather, the airline runs the risk of angering the passengers.

The utilization of the plane is also limited. It cannot fly from Delhi to Shimla, instance, for two reasons. First, a smaller plane takes longer to fly. Second, in Delhi, the airport operator charges an extra 27,000 per flight, asking the passengers to check in from the VIP lounge, as Air Himalaya is not a scheduled airline. That’s because, unlike regular airlines, Air Himalaya is not a scheduled airline but a charter operator under Indian regulations—its passengers must go through the special check-in process, forcing it to pay higher-than-normal charges.

For the same reason, Air Himalaya also cannot publish its schedule on travel portals like MakeMyTrip.com and can only offer tickets through its own website or referrals from friendly hotels in Kullu, Shimla and Chandigarh. “We only do flights for three months during peak tourist season," said the Air Himalaya official cited earlier, explaining why the flights are not sustainable.

Air Costa, which operates three 112-seater Embraer jets, said it feels the policy will help connect more airports.

“We endorse the motive of this policy, which is focused on making air travel affordable for everyone. Air Costa started with the vision of enhancing regional connectivity and shall continue its focus on connecting regional destinations to tier-I destinations. We are positively moving towards adding more sectors for better reach," said Kavi Chaurasia, vice-president (marketing and brand communication) at Air Costa.

The airline currently covers six states—Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, Rajasthan and Gujarat—with 24-32 daily flights. It plans to add two more aircraft this year.

Air Costa had got into trouble with aircraft lessors last week, forcing it to cancel flights for a day while it sorted out the issue, highlighting the perils faced by small regional airlines. Bengaluru-based Air Pegasus, another regional airline, has been grounded since last month.

SpiceJet’s Ajay Singh said the policy was in the right direction and that the airline was still evaluating how it will be able to take advantage of it. “Lots of issues need to be resolved before this can be effective," he said.

IndiGo president Aditya Ghosh, in an earnings call on 1 August, said it was “too early for us to say whether we are going to take advantage of the policy or not".

India has to also align its regulations for reinforcing regional connectivity to US and EU benchmarks, said Gopinath.

Unlike in the West, there are no cheaper, secondary airports in Indian cities, where smaller airlines could fly for a lower fee. Consequently, airports in large metros, which monopolize passengers, charge steep fees from airlines both big and small.

“You have to encourage a lot of regional players. All the regional connectivity has been killed by DGCA," said Gopinath, “The extortion by the airports has to stop. Multiple airports should compete as they do in major cities like in London."

India does not have secondary airports in its major metros currently; plans to build them in cities such as Navi Mumbai and Greater Noida have been delayed because of political considerations and obstacles in acquiring land.

On top of this, 31 airports built under the previous government, in locations like Gondia (former civil aviation minister Praful Patel’s constituency), Juhu, Kolhapur, Solapur, Akola, Jalgaon, Jaisalmer, Bhatinda, Ludhiana, Pathankot and Shimla, operate no flights.

They have been labelled India’s ghost airports despite 600 crore of public funds being spent on them.

Aviation minister Raju says these are “low-hanging fruits" and he expects flights to these airports to start soon because of the new civil aviation policy.

Mohan Rangathan, a Chennai-based aviation analyst, said the government should focus on getting flights to the airports it has already spent taxpayer money on instead of investing more in reviving World War era airstrips. “There has to be some accountability," he said.

Under the new policy, the ministry has said it will also develop a scheme for providing financial support for type rating (training on a particular type of plane) of pilots as pilot training costs 25-30 lakh and 7,000 pilots are currently unemployed. Experts say this is a risky bet.

“Aviation ministry should encourage airlines to hire on merit and offer financial assistance to those who are successful for their type rating. This should be in the form of a loan," said S. Vijayakumar, an airline commander with 35 years of experience. “If general and regional aviation take off in the country, there is scope for these CPL (commercial pilot licence) holders. If the only avenue for employment is the airline industry, many will not find jobs."

Nearly 8,000 CPLs are still estimated to be without jobs. Some have been forced to join family businesses or take on odd jobs to repay the 15 lakh they spent on acquiring aviation skills.

Vijayakumar said there are two other things the ministry can do to make life easier for pilots—improve the quality and transparency of DGCA pilot examinations and make the renewal of pilot licences easier.

Bharat Malkani, chairman and managing director at Max AeroSpace, says the policy would benefit aircraft maintenance providers like him. “Ease of doing business has gone up definitely," said Malkani.

He explained how, earlier, for any maintenance-related work, Indian aircraft maintenance providers had to go to an airline, which would then have to write to it to import a required aircraft part. “Now it is self attestation as an MRO (maintenance, repair, overhaul). We can import on our own. Instead of rounds of customs, it’s now legal for you to work—a huge benefit," he said.

India’s airlines spend around $1 billion on MRO every year; however, 90% of that goes to MRO units in countries such as Sri Lanka, Singapore, Malaysia and the United Arab Emirates, which offer lower costs, faster turnarounds and higher technical expertise. The same work in India could cost as much as 25-30% due to higher taxes.

“Why to send $1 billion every year abroad? At how many billion will we realize this? We need to cut taxes. Since everything is currently outsourced, there is no revenue gain by even having such a big tax anyway," he said, referring to how airlines send their aircraft abroad for maintenance because of high taxes.

If aircraft maintenance work is done in India, it will create 50,000 direct and indirect jobs each, he said.

Over time, Malkani hopes, the government will come around.

Aviation secretary Rajiv N. Choubey said the ministry has already taken several steps to create a clear policy framework to allow for entrepreneurs to come in and invest in India’s aviation story and that it was now time for entrepreneurs to take the next steps.

He recalled the scene of an air ambulance that had crash-landed in farm fields on Delhi’s outskirts days before the aviation policy went to the Union cabinet for approval.

“I distinctly remember that picture. Ice-cream sellers had surrounded the plane to serve the curious crowds gathered there," he said in Hindi, “Businessmen can smell an opportunity from miles away. It won’t be very different here."

This is the first of a three-part series. Next: What the new civil aviation policy means for stakeholders, customers.

Close