Govt plans to draw up policy for building low-frills airports

Govt plans to draw up policy for building low-frills airports

Mumbai: Low-frills airports may finally get a push in India, with the government mulling formulating a policy on setting up such terminals.

Private airport operators and investors have for at least half a decade contemplated setting up airports or terminals dedicated to low-fare airlines, but none has materialized.

With more full-fare airlines embracing low-cost services and many carriers wooing traffic from small cities and towns, the government is waking up to the concept of no-frills airports to keep fares low for passengers.

Low-frills airports have minimal infrastructure in terms of runways, terminal facilities and navigational aids, all of which will translate into huge savings for airlines in airport charges. India’s existing airports do not differentiate between full- and low-cost airlines and airport charges get built into passenger fares.

An official in the aviation ministry said the government has started discussing low-frills airports as a concept.

“We are planning to formulate a policy to promote low-cost airports across the country," the official said while pointing out that the government hasn’t in the past objected to investors building low-cost airports.

Another ministry official confirmed the development, but he too asked not to be identified.

Airport operators GVK group and GMR Group, German airport operator and GMR’s partner in the Delhi airport Fraport AG, and low-cost aviation pioneer G.R. Gopinath have considered setting up low-frills airports, but have seen little progress because of various reasons.

Low-frills airports are prevalent in advanced markets such as the US, Europe and Singapore. In India, experts say demand for such terminals will rise as local airlines expand their low-fare operations.

“The last five years belonged to the low-fare carriers. The next five may well belong to low-cost airports in tier II and III cities in India," said Amber Dubey, director of aerospace and defence advisory at KPMG. “Though this concept is yet to take shape in India, market forces will ensure that this happens faster than one could imagine."

Jet Airways (India) Ltd, the country’s largest airline by passengers carried, said in August it will introduce more low-fare flights. The country’s second largest low-fare carrier SpiceJet Ltd will begin flying to smaller cities this month.

A Jet executive said statistics show more passengers are flying low-fare the past six months and his airline is forced to shift more flights to this category.

“We are struggling to cut down cost to stay afloat in this low-fare market," he said, also requesting anonymity. “On the contrary, high airport charges are killing us. Low-cost airports could be a relief at least in secondary cities."

Three of every four tickets Jet sells are in the low-cost segment.

The first ministry official said the government is aware more carriers are moving towards the low-fare category and investors are willing to set up no-frills airports.

Charles Dhanaraj, associate professor of management at the Indiana University’s Kelley School of Business and an expert on India’s aviation industry, is sceptical of low-fare airports in the country. “I find that we are on a slippery slope moving towards the low-fare segment," he said. “Average Indian fares are cheaper compared to the international fares... Shifting to the low segment will make the industry unviable."

KPMG’s Dubey, too, said low-cost airports in tier II and III cities may not be viable in the near-term given the small traffic, and proposed creating a fund to subsidize the operations of low-frills airports.