Only about a third of the 232 routes to connect 137 cities that have been awarded to airlines under the RCS program are currently operational, even as the government has launched a fourth round of bidding this week. But there is likely to be limited appetite for the airport offerings, not only because of poor infrastructure, including landing systems, but also challenging geography like hilly areas, airline officials told Mint on condition of anonymity.
"At other airports, where infrastructure is not an issue, the demand is just not there," said a senior executive with one of the airline. “As it stands, the government slogan of Ude Desh Ka Aam Nagrik (May the common man fly) stands only on paper. RCS will be successful only in a handful of routes which have enough demand to stimulate fares," he added.
As things stand, the focus of the fourth round of RCS bidding will be to connect to priority areas like North East India, Jammu and Kashmir, Ladakh, as well as hilly states in other parts of the country, and islands.
Typically, airlines ply smaller aircraft to cope with the low demand on such routes, but that in turn drives up costs and hurts commercial viability. “Subsidies offered by the government to operate on such routes don't cover the entire costs," the airline executive said."Fares on these routes provide no stimulant."
For the regional program to work, the government needed to create a hub and spoke arrangement between smaller Indian cities and larger metros with the help of the national carrier Air India, which would have helped even private airlines. But cash-strapped Air India has not been able to establish such a network, said a second airline executive. In aviation terminology, a hub refers to a central airport that flights are routed through, and spokes are the routes that planes take out of the hub airport.
A senior Airports Authority of India (AAI) official told Mint that while the central government is doing its bit by ensuring that smaller operators get timely disbursement of funds under VGF (viability gap funding), concrete steps from the state governments, like reducing taxes on fuel, will further push some airlines to start their services in some of the under-connected routes.
Even as the government has been adding remote airports to the domestic network, several regional airlines have ceased operations in the last two years, particularly small operators. These include Air Odisha, Zoom Air, Air Carnival, Supreme Airlines, Jamshedpur Air Connect, North East Shuttles and Air Costa. According to data from the Directorate General of Civil Aviation (DGCA), regional airline Air Deccan has not flown since July 2019.
Currently, there are 43 underserved or unconnected airport in the country including Shimla, Mysore, Gwalior and Shillong.Queries sent to union aviation minister Hardeep Singh Puri were unanswered till press time.
Congested major airports also find it difficult to allocate slots to regional airlines, which mostly fly turboprop aircraft that take longer to land and take off, said a Mumbai-based analyst tracking the sector closely. This forces some of the regional airlines to depend on larger aircraft, which do not have adequate demand.
"RCS scheme is still very dependent on bigger airlines like SpiceJet, IndiGo and Alliance Air to connect smaller towns and cities,"said the analyst, who requested anonymity.
For RCS scheme to be successful, airport infrastructure will have to be ready, with a good number of tier two airlines (regional airlines) operating on these routes, with an aim to maintain a viable profitable model, said Jagannarayan Padmanabhan, Director, CRISIL Infrastructure Advisory.
Padmanabhan said that the state governments will have to support the program to be successful, and states may consider putting in place a state civil aviation policy to cater to the unique challenges of each place.
"The ecosystem to that extent need a lot of time to germinate and Padmanabhan said adding that states will have to tie up with tourism boards and package, market potential tourist destinations under the RCS scheme to attract passengers.