Given how middle-class India has taken to flying after low-cost carriers (LCCs) came into being, it is not surprising the Rakesh Mohan committee (National Transport Development Policy Committee) believes India’s air passenger throughput will grow from the current 150 million or so to over 1.1 billion by 2031-32. But unlike the current situation where the bulk of demand originates in a few cities, the next round of growth will come from smaller towns. Right now, about 90% of the passenger traffic in the country is being handled by six airports—Delhi, Mumbai, Chennai, Bangalore, Kolkata and Hyderabad—while the first two handle about 70%.
This, however, is where India runs into a problem. Unlike developed markets of the west, where the concept of LCCs originated from, India has no low-cost airports. It doesn’t help that local taxes on aviation fuel are so high it makes flying relatively expensive. Which is why it is a good thing that the aviation ministry is now actively looking at a policy of creating low-cost airports—200 of them, going by the talk in the aviation ministry. To begin with, 20-25 towns and cities have been identified where airlines will not pay any landing, parking or navigational charges. In others, the plan is to offer discounts on overnight parking. In states that levy a 5% or lower VAT on ATF, night rates will be waived completely—the idea is to incentivise states to lower ATF rates since the business that will get generated through more flights will far outstrip the benefits from higher VAT rates. If the policy is implemented well, and there is no reason why it should not given India now has a history of successfully implementing many PPP airports, this will be a big boon to LCCs. They will, as they do in the rest of the world, fly in and out of small cities near the big ones—and lower airport charges will outweigh the costs of higher aviation fuel. Planes are this century’s trains, and the sooner we realise it, the better.