Aviation: Flight of Fancy
The fastest growing aviation market in the world needs a major infrastructural backing for it to sustain, grow and support the requirements of the burgeoning population, explores Tejasvi Sharma
Empty counters and eerie silences no longer accompany an early morning check in at the airport. The airport, just like the Indian aviation market, is seen teeming and bustling with people. And that holds true not only for the often-visited popular routes, but even the smaller and not so oft visited destinations.
Passenger traffic in the country has seen an annual growth of approximately 20 per cent in recent years. This has made the Indian aviation market, the fastest-growing aviation market in the world, and a lucrative opportunity for large and small plane makers. International Air Transport Association (IATA) research indicates that the country will have about 478 million airline passenger traffic, which will be more than that of Japan (just under 225 million) and Germany (just over 200 million) combined, by 2036. The organization also predicted that by 2020, the Indian aviation market is likely to take the position of the third largest aviation market in the world, displacing the United Kingdom.
The efforts and initiatives of the government have brought about a positive change in the sector. “Government initiatives like the Regional Connectivity Scheme (RCS or UDAN) are set to transform India as it will enable the common man to fly, and connect previously unserved or underserved regions of the country to the mainland. A recently released report by the Government of India stated that for the first time in India, more people travelled in airplanes than in AC trains. The emphasis by policymakers on passenger rights, and use of predictive analysis tools by operators for better service and customer experience, are also bound to positively impact the sector,” shares Vishwas Udgirkar, Partner, Deloitte India.
According to a report by CAPA India on ‘Resetting the Airport Planning Framework’, “India will require a massive increase in airport capacity over the coming years and decades, to be developed through a combination of enhanced productivity of existing assets, and investment in new infrastructure. This is a colossal undertaking, of a size and scale attempted perhaps by only one other country.”
The report further highlights the need for augmenting the existing airport infrastructure to cater to the future growth. It adds how ‘The high growth rate is compressing planning and project execution cycles. And in the case of airport infrastructure - which is subject to long gestation periods - the development of capacity is lagging behind demand. There is a risk that the development of airport assets could remain in perpetual ‘catch-up mode’ in the absence of a strategic re-set of how the sector prepares for a future which will be unrecognizable in size and scope from today.’
There is a dire need for a holistic, long term national master plan for airport infrastructure, absence of which has resulted in a situation where most of the airports in the country have reached, or are fast approaching, their official capacity. “At a system wide level, utilization of airport infrastructure stood at 97.4% in FY2018. Even allowing for the fact that airport can be stretched to handle traffic that is above their notional capacity, the sheer pace of growth means that even this flexibility cannot be relied upon for more than 2-3 years. According to CAPA forecasts (shared in slide 16), airport capacity will need to be augmented by 6.4x over the next 15 years to support the projected growth in passenger traffic,” says the CAPA report.
This rapidly growing clutter in the airspace and on the ground below has also been acutely affecting the ambitious “regional Connectivity Programme’ of the government aiming to link the smaller and the less served areas in the country. The ambitious scheme launched by Prime Minister Modi last year looked at boosting economic growth by refurbishing unused colonial-era airstrips or building newer airports, and giving incentives to airlines to offer discounted fares to connect them with bigger cities. Looking at the scheme in numbers, the government was aiming to open 31 new airports by the end of 2017. However, only 16 airports have become operational till date.
Sensing the urgent need of the hour, Suresh Prabhu, Minister for Civil Aviation had also recently reviewed the growth of airport infrastructure in India and called for preparation of a holistic “Vision - 2035” document, stated a PIB report. According to the official ministry statement, ‘The vision document is expected to address issues such as congestion at airports, runways and airspace; development of unserved and under-served airports; ways and means to boost the air connectivity to small cities and towns - thereby increasing revenues. It will further provide a direction to the economic development in these areas in terms of job creation and cargo infrastructure development’. The minister had also recently announced that an investment of Rs. 10 lakh crore would be made to expand air service in country, further strengthening the immense potential of the aviation sector in the country.
Earlier in the year, Finance Minister Arun Jaitley had announced a scheme in budget 2018, to expand airport capacity more than five times to handle a billion trips a year through a new announced scheme known as NextGen Airports for Bharat (NABH) Nirman. Under the scheme, 100 airports will be established in the country over a period of 15 years with an approximate investment of Rs. 4 lakh crore. A big share of this investment is being expected to be pitched in from the private sector.
According to CAPA, “There is an urgent need for a new framework for infrastructure development and management to ensure that the implementation of initiatives such as NABH Nirman is effective in delivering against the vision and intent of the Ministry of Civil Aviation (MoCA), as well as meeting the needs of the industry. Such a framework should ensure that airport assets are optimally utilised relative to global benchmarks, and that decisions to invest in new airports are appropriate in terms of timing and scale. The challenge ahead is unprecedented in scale and complexity. Not only has such a task never been attempted in India, but also aside from China, no other aviation market in the world is expected to grow so much and so fast. Planning, design and execution will all be critical.”
Holding back growth
One of the major concerns plaguing the aviation sector in the country and halting its growth has been the complex process of land acquisition. The Minister for Civil Aviation Suresh Prabhu had recently asked officials to suggest innovative land acquisition methods - a serious problem faced at many cities. The ministry had, in 2017 given ‘in principle’ approval for setting up of 18 Greenfield Airports in the country, estimated with a cost of Rs. 300 billion, with the timeline of these projects solely depending upon land acquisition and the requisite clearances being obtained by the operators.
The list of these airport along with the estimated cost according to the ministry data includes Mopa in Goa (approx. Rs. 3100 cr), Navi Mumbai (approx. Rs. 16704 cr), Shirdi (approx. Rs. 320.54 cr) and Sindhudurg (approx. Rs. 520 cr) in Maharashtra; Bijapur (approx. Rs. 150 cr), Gulbarga (approx.
Rs. 13.78 cr in initial phase), Hasan (approx. Rs. 592 cr) and Shimoga (approx. Rs. 38.91 cr) in Karnataka; Kannur in Kerala (approx. Rs. 1892 cr); Durgapur in West Bengal (approx. Rs. 670 cr); Dabra in Madhya Pradesh (approx. Rs. 200 cr); Pakyong in Sikkim (approx. Rs. 553.53 cr); Karaikal in Puducherry (approx. Rs. 170 cr); Kushinagar in Uttar Pradesh (approx. Rs. 448 cr), Dholera in Gujarat (approx. Rs. 1712 cr) and Dagadarthi Mendal, Nellore Dist. (approx. Rs. 293 cr), Bhogapuram in Vizianagaram District near Visakhapatnam (approx. Rs. 2260 cr) and Oravakallu in Kurnool District (approx. Rs. 200 cr), Andhra Pradesh.
As CAPA research suggests, developing a greenfield airport can take at least 7-10 years from inception of the plan. “Such projects are incredibly complex and face challenges with respect to the availability of sufficiently large land banks, the rising cost of land in urban centres, issues associated with land acquisition, financing of projects, environmental concerns, surface access infrastructure, economic regulation, state and local politics, and multi-modal integration. In India, the experience with airports such as Navi Mumbai, Sriperumbudur, etc, shows that greenfield airport development can in reality take 15-20 years.”
It further adds how the country will need to construct an additional 500-600 million of capacity by 2030. Augmentation of this capacity would need an investment of $36-45 billion, including $12-15 billion of equity capital. The 55 new airports that are projected to be needed by 2030 will require 1,50,000 to 200,000 acres of land to be allocated for their development.
Along with the other pain points, what is also slowing down the future of the segment in the country is the lack of skilled workforce. “While the government has sharpened its focus on this aspect, there is still a long way to go, particularly in smaller and regional airports. Another challenge is that of skill gap. At the moment, few Indian universities offer courses tailor-made for the aerospace sector and the country is yet to have an established and recognized institute/university specializing in aerospace.,” adds Udgirkar. Surely, sky is the limit for the aviation industry in the country if given the right impetus.
@EPC World Media