While India has a population of 1.3 billion, only 81.091 million domestic passengers travelled by air in 2015. The 20-plus per cent growth in traffic that year was mainly due to low fares because of the fall in Aviation Turbine Fuel price. Indian airports handled 223.8 million passengers in 2015-16. The top six airports accounted for 70 per cent of the traffic, while the rest was spread over 69 smaller airports that have regular scheduled air services.
Predictably, air traffic is very unevenly spread. Though India has over 400 airports, including many crumbling airstrips, only 75 of them have regular scheduled air services. The others are either under-served or unserved. The Airports Authority of India (AAI) has 30 airports that offer no air services. Numerous smaller cities have no air connectivity as airlines find services to them commercially unjustifiable. The demand for travel is enormous. India’s railways handle in two days about as many passengers as the airlines carry in a year. The lack of air connectivity must be hurting many smaller cities’ socio-economic development. While the Modi government’s initiative to enhance regional air-connectivity through the Regional Connectivity Scheme (RCS) is commendable, it overlooked some inevitable problems of execution.
The Centre accepts that such services can work only through subsidies — by the central and state governments, the airports, and even the airlines. To make airfares affordable, the government decided to limit them to Rs 2,500 per flying hour for fixed-wing aircraft. For the shortest fixed-wing aircraft flight, of about 200 km to 225 km, involving less than an hour of flying, the fare will be limited to Rs 1,770. Similarly, for the very longest flight under RCS, the fare is to be limited to Rs. 4,070. Naturally, the airlines, which will operate regional aircraft, that have a very high cost per seat-km, cannot break-even at such low fares. Thus, subsidies are needed to meet the shortfall through the government’s Viability Gap Funding (VGF). These will have to be high as regional services generally have low loads, low-yield fares, and generally operate over short sector lengths. Because of off-optimum flying conditions like speed and altitude, these commercial flights also have the highest cost per seat-km.
A two per cent tax on all non-regional air services per ticket was planned as the airlines’ contribution to the VGF. For example, the cess on domestic non-regional flights would be Rs 7,500 for a sub-1,000 km flight, Rs 8,000 for 1,000-1,500 km, and Rs 8,500 beyond 1,500 km. It was expected to generate a total annual revenue of Rs 4 billion. However, all private airlines went to court but failed to secure a stay order. Only one airline, presumably state-owned Air India, had paid the VGF cess to AAI —charged with operating the RCS scheme.
18/02/17 Hormuz P Mama/DNA
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Predictably, air traffic is very unevenly spread. Though India has over 400 airports, including many crumbling airstrips, only 75 of them have regular scheduled air services. The others are either under-served or unserved. The Airports Authority of India (AAI) has 30 airports that offer no air services. Numerous smaller cities have no air connectivity as airlines find services to them commercially unjustifiable. The demand for travel is enormous. India’s railways handle in two days about as many passengers as the airlines carry in a year. The lack of air connectivity must be hurting many smaller cities’ socio-economic development. While the Modi government’s initiative to enhance regional air-connectivity through the Regional Connectivity Scheme (RCS) is commendable, it overlooked some inevitable problems of execution.
The Centre accepts that such services can work only through subsidies — by the central and state governments, the airports, and even the airlines. To make airfares affordable, the government decided to limit them to Rs 2,500 per flying hour for fixed-wing aircraft. For the shortest fixed-wing aircraft flight, of about 200 km to 225 km, involving less than an hour of flying, the fare will be limited to Rs 1,770. Similarly, for the very longest flight under RCS, the fare is to be limited to Rs. 4,070. Naturally, the airlines, which will operate regional aircraft, that have a very high cost per seat-km, cannot break-even at such low fares. Thus, subsidies are needed to meet the shortfall through the government’s Viability Gap Funding (VGF). These will have to be high as regional services generally have low loads, low-yield fares, and generally operate over short sector lengths. Because of off-optimum flying conditions like speed and altitude, these commercial flights also have the highest cost per seat-km.
A two per cent tax on all non-regional air services per ticket was planned as the airlines’ contribution to the VGF. For example, the cess on domestic non-regional flights would be Rs 7,500 for a sub-1,000 km flight, Rs 8,000 for 1,000-1,500 km, and Rs 8,500 beyond 1,500 km. It was expected to generate a total annual revenue of Rs 4 billion. However, all private airlines went to court but failed to secure a stay order. Only one airline, presumably state-owned Air India, had paid the VGF cess to AAI —charged with operating the RCS scheme.
18/02/17 Hormuz P Mama/DNA
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