West Bengal govt plans sops for airlines in bid to boost traffic at smaller airports
The West Bengal government is formulating a plan to provide incentives to airlines to fly to smaller airports in the state in a bid to improve connectivity, say officials
Kolkata: The West Bengal government, which owns a substantial minority stake in a private airport, is preparing a policy to generate traffic at smaller airports such as Andal, Malda and Coochbehar.
The state will provide incentives to airlines to fly to these airports in a bid to improve connectivity, according to officials, who said the policy is at an early stage of development.
To start with, the state government will waive or offer substantial discount on local taxes on aviation turbine fuel, or ATF, for flying to these destinations. West Bengal, which charges 28% local taxes on ATF—one of the highest in India—has already waived it for flights to Andal, Bagdogra and Coochbehar, said a key official in the transport department, who asked not to be identified.
Similar and other incentives are being considered to encourage airlines to fly to these smaller airports, officials added. To be sure, Bagdogra, the gateway to north Bengal and Sikkim, is a busy airport, which is being expanded to deal with surging traffic. But the others are not.
Unless traffic picks up, the state’s own investment of ₹300 crore in the Andal airport, which is operated by Bengal Aerotropolis Projects Ltd (BAPL), could be in jeopardy. The airport became operational three years ago, but traffic, in terms of the number of passengers using it, is less than a third of the bare minimum required to break even, said the government officials cited above.
Andal needs around 400,000 passengers a year to break even, said a key BAPL official, who, too, asked not to be named. Currently, with only four weekly flights to Delhi operated by Air India, Andal gets around 120,000-130,000 passengers a year.
In the past three years of operation, Andal has faced disruptions as well: Air India, which started services in May 2015, suspended flights from the airport in June 2016. It resumed flights from Andal in April this year.
The Bengal government owns a 26% stake in BAPL. Other investors in the venture are Singapore’s Changi Airports International Pte Ltd, which owns 30% in it. A group of entrepreneurs who started the venture had expected people travelling by Rajdhani Express to Delhi from the industrial belt of Durgapur-Asansol to switch to planes if they had an airport close to their homes. It didn’t happen, said the BAPL official cited above.
“We may need two more years to reach the break-even threshold,” he said. An integrated township development centred on the airport was also anticipated, but it, too, hasn’t taken off. In January this year, SpiceJet announced plans to start services from Andal, but that, too, hasn’t materialized yet.
“You need time to scale up traffic from new airports,” said the BAPL official. Ideally, airlines should start with smaller aircraft with seating capacity of around 120. Even if such smaller planes are not fully booked initially, losses are limited before the route becomes profitable.
“But the problem with private airlines is that they have very few planes of that capacity in their fleet,” this person said. So airports such as Andal, Malda and Coochbehar are “hugely dependent” on Air India, which has a relatively bigger fleet of such small aircraft, he added.
Hence the need for a comprehensive incentive package, which isn’t limited to waiver or discount on local taxes on jet fuel.
Though Air India has resumed services from Andal, it is no longer plying the old route of Delhi-Kolkata-Andal-Kolkata-Delhi. Air India is operating direct flights between Delhi and Andal, said a spokesperson for Air India. On average, the Delhi-Andal flight is operating with a passenger load of at least 80%, according to him. “A lot of factors have contributed to the turnaround and the subsidy on ATF is one of them,” he added.
- Banks turned wary of NBFCs months before IL&FS defaults
- HUL Q2: Rising input costs face off against healthy demand growth
- Q2 results: DMart finally set to face a reality check
- Temporary staffing: Decent employee additions, margin pressures may sustain
- Gujarat relief for Tata Power, Adani Power underlines sector’s harsh reality