The Airports Authority of India (AAI) has recently come up with two welcome proposals that aim to promote the development and use of smaller airports in the country. In the first move, the AAI plans to go in for tax-free bonds of up to Rs. 1000 crore to modernise some of the smaller, non-metro airports. In its other initiative, the Authority intends to offer a three-year concession scheme for airlines willing to operate to a select lot of smaller airports. To at least about 15 such airports, the AAI proposes to extend a 75 per cent concession on landing and related handling charges in the first year, 50 per cent in the second year, 25 per cent in the third and normal charges from the fourth year. The expectation seems to be that once traffic gets generated from these centres, the airlines will be able to make them viable operations. The plan is to plough some funds this year to improve facilities in 15 airports, and over a period of time, to promote 51 other smaller airports. The bulk of these will be in central and western States, in addition to Uttar Pradesh. While Finance Minister P. Chidambaram has already backed the plan for State-run agencies to issue tax-free bonds of up to Rs. 50,000 crore, the Civil Aviation Ministry has yet to clear the proposal to introduce a concession scheme for airlines to fly to small centres.
The move to promote smaller airports should be a welcome signal for Air Asia, a new private joint venture airline that is set to begin operations in India this October. The AAI has offered its scheme to all airlines willing to consider this option. The idea will work well for an airline thinking of developing ‘hub-and-spoke’ operations. In this concept, airlines operate feeder services from the small (spoke) centres to a regional hub, from where regular flights connect to the major and metropolitan cities in the country, in addition to providing links to international services. Though the Government of India did its best to encourage a concessional approach to ensure air services for the northeastern Indian States, the results have not been too successful. This despite the fact that air services provide the easiest and quickest connection to these States. A decade ago, low-cost carriers such as Air Deccan came like a whiff of fresh breeze to connect India’s smaller cities by air. But as costs rose, operators found that these flights were not always viable. A combination of concessions in both landing charges and the VAT on aviation fuel, which the State governments must offer, ought to make these routes profitable over the medium term. The Civil Aviation Ministry must take the initiative to push this concept as soon as it can.