Airports - A Realm of Opportunity

Amber Dubey examines the scope of Indian airports and the way forward in the year ahead. FY 2014-15 saw a revival in Indian aviation thanks to global oil price reductions, improvement in the Indian economy and a series of discount offers from airlines. Passenger and cargo traffic grew in FY 2014-15 by 12.5 per cent and 11 per cent respectively. However, only two airlines out of eight reported profits. The period from April to September 2015 has seen an encouraging 21 per cent growth in air traffic backed by continued low fuel prices and the improving economic climate. Many airlines have reported profits in the first half of FY 2015-16, which is encouraging. Industry challenges The low oil prices may not continue forever. India needs to bring in structural reforms to realise its true potential. There are challenges on account of high fuel taxes and airport charges. Restrictive regulations and procedures adopted by the Ministry of Civil Aviation (MoCA), DGCA, customs, immigration, quarantine and security agencies add to the troubles. National Civil Aviation Policy (NCAP 2015) On October 30, 2015, MoCA released the draft NCAP 2015. The aim of the policy is to create an eco-system to enable 300 million annual domestic tickets by 2022 and 500 million by 2027; from around 70 million currently. The growth is expected to happen by way of fiscal support for regional connectivity, direct cash subsidies to regional carriers, reduction in fuel prices, rationalisation of taxes and royalties, and various other procedural reforms. Under NCAP 2015, the Regional Connectivity Scheme (RCS) will be launched to boost air connectivity to Tier-III-IV towns. The government will provide cash subsidies to airlines operating on RCS routes and levy no airport charges for 10 years. Cash subsidies will come from the state governments and a 2 per cent levy on all air tickets. The Regional Connectivity Fund (RCF) so created will provide viability gap funding for airlines operating on RCS routes. This will give a fillip to the local economy, tourism and employment creation. NCAP 2015 has conferred infrastructure status on Maintenance, Repair and Overhaul (MRO), ground handling, cargo and ATF infrastructure. MRO has been supported in a massive way by way of zero rating of service tax and simplification of import procedures. NCAP 2015 will enhance global connectivity by way of ´open skies´ with countries beyond a 5,000-km radius from New Delhi. Norms for bilateral seat quotas and code shares have been simplified. Helicopters and small aircraft will be promoted for last-mile regional connectivity and rapid medical evacuation. DGCA will strive to create a single-window system for all aviation-related transactions, queries and complaints. Most of the services rendered by DGCA will be fully automated by April 1, 2016. Airport construction projects Several greenfield airport projects are at multiple stages. The big ones are Navi Mumbai and Mopa (Goa) where the winning bidder is likely to be identified by April 2016. Construction of Kannur airport in Kerala is underway. Other greenfield airports under active consideration include Bhogapuram, Sindhudurg, Gulbarga, Shimoga, Gangtok, Kushinagar, Itanagar, Pakyong, Deoghar and Jharsuguda. No-frills airports are being planned in 2016 at Singrauli, Dagadarthi and Orvakal, to which some more may be added by different state governments once the RCS is implemented. Expansion projects in Delhi, Bengaluru, Cochin, Vadodara and Pune are being planned in 2016. The way forward All considered, 2016 could be a turning point in Indian aviation. MoCA may have to implement NCAP 2015 in letter and spirit. The industry should step up and leverage this unique opportunity. All this may help India achieve its lofty ambition to be the third largest aviation market by 2020. About the Author: Amber Dubey is Partner and India Head of Aerospace and Defence at global consultancy KPMG.