THE OTHER DI­MEN­SION OF RE­GIONAL CON­NEC­TIV­ITY IN IN­DIA

The Re­gional Con­nec­tiv­ity Scheme is poised to make a sig­nif­i­cant dif­fer­ence in In­dia, en­abling more peo­ple, in cur­rently ‘re­mote’ lo­ca­tions, to have ac­cess to air links at an af­ford­able price. This ini­tia­tive by the gov­ern­ment has en­er­gised the na­tion and

SP's Airbuz - - Table Of Contents - BY MARK DUNNACHIE, VICE PRES­I­DENT, EMBRAER ASIA-PA­CIFIC

THE RE­GIONAL CON­NEC­TIV­ITY SCHEME (RCS) that was re­cently rolled out is the gov­ern­ment’s push to in­crease con­nec­tiv­ity in In­dia par­tic­u­larly tar­get­ing un­der­served and un­served air­ports, while pro­mot­ing the use of smaller air­craft, of up to 80 seats, to do so. We ap­plaud this ini­tia­tive that will make air links ac­ces­si­ble to more peo­ple when air­lines in In­dia take up the chal­lenge. We also un­der­stand, how­ever, the hes­i­ta­tion that air­lines have on the RCS, as the capped air­fares may not al­ways make eco­nomic sense. In this ar­ti­cle, we of­fer an ad­di­tional av­enue for air­lines to pur­sue, which will im­prove con­nec­tiv­ity for trav­ellers, and en­able air­lines to grow their op­er­a­tions whilst in turn ful­fill­ing the gov­ern­ment’s de­sire to en­hance travel for all. BUILD ON THE PO­TEN­TIAL OF UN­DER­SERVED MAR­KETS. When we look at ex­ist­ing air­ports with ex­ist­ing air links, we see that much more can be done to en­hance con­nec­tiv­ity and fre­quency in sec­ondary and ter­tiary cities. Based on IATA data, un­der­served mar­kets have sub­stan­tial pas­sen­ger de­mand for di­rect (no stopover) and for more sched­uled ser­vices. Lever­ag­ing the ex­ist­ing in­fra­struc­ture at these air­ports al­lows air­lines to fur- ther in­tro­duce new routes be­tween cities that cur­rently re­quire tran­sit to get there or cities that have a low num­ber of sched­uled flight fre­quency (typ­i­cally less than a daily fre­quency flight). The in­tro­duc­tion of a di­rect flight ben­e­fits not only the pas­sen­ger by re­duc­ing to­tal travel time, but also en­ables the air­line to realise im­proved yields, in some cases up to 15 per cent, on such routes. This is of course the clas­sic Blue Ocean, Red Ocean con­cept where op­por­tu­nity lies in un­der­de­vel­oped or un­tapped mar­kets.

One ex­am­ple of such a mar­ket is Chen­nai-Dharamshala, where the cur­rent way to travel be­tween those two cities is via a 10-hour stopover at Delhi; trav­el­ling from Hy­der­abad to Am­rit­sar via a three-and-a-half hour stopover at Mum­bai is an­other of the many ex­am­ples.

One might ask, if such an ob­vi­ous op­por­tu­nity ex­ists, what is hold­ing back air­lines from seiz­ing this op­por­tu­nity? The type of ‘tool’ mat­ters. The cur­rent fleet pro­file of the In­dian avi­a­tion mar­ket is heav­ily fo­cused on nar­row-body air­craft such as the Air­bus A320 fam­ily and Boe­ing B737 fam­ily that have a seat ca­pac­ity of 140 seats and above. On the other end of the ca­pac­ity spec­trum, three of the four largest air­lines have tur­bo­prop air­craft (ATR 72 and Dash 8), which have a seat ca­pac­ity lim­ited to 80 seats and be­low where the prod­uct is largely only vi­able for sec­tors with less

than 500 km. In be­tween this spec­trum, there are only a hand­ful of 80to 130-seat jet air­craft (CRJ700 in Air In­dia and E190 at Air Costa), and this rep­re­sents an un­tapped op­por­tu­nity.

Based on Embraer’s stud­ies, two-thirds of un­der­served mar­kets within In­dia are too thin in pas­sen­ger de­mand for nar­row-body air­craft op­er­a­tions and more than 80 per cent of these mar­kets have stage lengths too long for vi­able tur­bo­prop op­er­a­tions. It is fore­cast that by 2020, there will be more than 120 un­der­served mar­kets with an av­er­age stage length of more than 1,000 km. These mar­kets are more op­ti­mally served by 80- to 130-seat jets of­fer­ing the ideal ca­pac­ity size for thin pas­sen­ger de­mand and with the ad­e­quate range ca­pa­bil­i­ties.

We have seen mul­ti­ple ‘suc­cess sto­ries’ across the globe, show­ing how air­lines have used E-Jets to stim­u­late traf­fic in sec­ondary and ter­tiary cities. In China, for ex­am­ple, Tian­jin Air­lines have been op­er­at­ing their fleet of E190s to de­velop routes to and from cities like Tian­jin, Xi‘an, Urumqi (west China) and Ho­hhot (north­ern China). Ja­pan Air­lines’ sub­sidiary J-Air uses E190s and E170s to right­size ca­pac­ity in or­der to max­imise fre­quency on routes or com­ple­ment larger gauge air­craft at off-peak times to en­hance mar­ket con­nec­tiv­ity.

WHAT BEN­E­FITS DO EMBRAER’S 80- TO 130-SEAT E-JETS OF­FER?

MORE CARGO AND ON­BOARD SER­VICE CA­PA­BIL­I­TIES. Due to the low yield en­vi­ron­ment in In­dia, it is im­por­tant that air­lines gen­er­ate rev­enue streams away from pas­sen­ger fares — an­cil­lary cabin ser­vices be­ing one source, but even more im­por­tantly, cargo rev­enue. Un­like other air­craft, whether tur­bo­prop or jet, in the 80- to 130-seat cat­e­gory, the E-Jets can ac­com­mo­date more cargo vol­ume and weight, typ­i­cally of­fer­ing up to two tonnes ca­pac­ity on top of checked bag­gage. This is a sub­stan­tial rev­enue stream. LOWER CASK EVEN COM­PARED TO TURBOPROPS. Al­though cur­rent ATR 72 and Dash 8 air­craft fill the seg­ment of an 80-seat air­craft, the air­craft range is a lim­i­ta­tion to their ef­fec­tive­ness in de­liv­er­ing in­creased con­nec­tiv­ity. In con­trast, Embraer E-Jets of­fer a range that cov­ers In­dia end-toend. From an eco­nomic stand­point, with an av­er­age net­work stage length of 550 km, and a util­i­sa­tion of 11.7 block hours per day per air­craft, the cost per avail­able seat kilo­me­tre (CASK) of a 100-seat Embraer E190 air­craft can be 12 per cent to 15 per cent lower than that of an ATR 72 which has levies on fuel price VAT. The se­cond-gen­er­a­tion of E-Jets, the E-Jets E2, de­signed to pro­vide bet­ter fuel econ­omy, will of­fer even greater cost ad­van­tage through the all-new Pratt & Whit­ney geared tur­bo­fan en­gine and a re­duc­tion in di­rect main­te­nance costs. This cost ad­van­tage that the E-Jet and E-Jet E2 fam­ily can de­liver will bring about lower fares for trav­ellers and higher prof­its for air­lines, mak­ing the en­tire avi­a­tion ecosys­tem a health­ier and more sus­tain­able en­vi­ron­ment. BET­TER PRO­DUC­TIV­ITY AND LOWER MAIN­TE­NANCE COSTS THAN TURBOPROPS. As avi­a­tors say: an air­craft can only make money when it is fly­ing. Be­ing a jet-pow­ered air­craft, the E-Jets can fly faster and their typ­i­cal high ser­vice re­li­a­bil­ity en­ables them to fly with higher fre­quency and more sec­tors than the tur­bo­prop or other 80- to 130-seat air­craft. Fuji Dream Air­lines, an all E-Jet op­er­a­tor in Ja­pan, re­cently achieved a 12-month ser­vice re­li­a­bil­ity av­er­age of 99.83 per cent — the high­est among all E170 and E175 op­er­a­tors. On top of that E-Jets have less main­te­nance down time than other air­craft types. E-Jets have longer in­ter­vals be­tween Heavy Checks as the air­craft does not have a cal­en­dar limit on Heavy Checks, un­like the B737, CRJ and the Dash 8 tur­bo­prop that has a 36-month limit. The A320 and ATR tur­bo­prop are even shorter with a 24-month limit be­tween Heavy Checks.

Fur­ther­more, cou­pled with the E-Jet su­pe­rior flight hour (FH) lim­its for Heavy Checks, as­sum­ing a typ­i­cal an­nual util­i­sa­tion of 2000FH, the E-Jets re­quire only two Heavy Checks as com­pared to three to five Heavy Checks for the other air­craft types in a 10-year pe­riod. The re­sult is lower main­te­nance costs for E-Jets with less down time and Heavy Checks, and greater rev­enue op­por­tu­ni­ties with the higher pro­duc­tiv­ity of E-Jets. CON­CLU­SION. There are many av­enues for re­gional con­nec­tiv­ity in In­dia to flour­ish, and this should in­clude build­ing on the ex­ist­ing air links at ex­ist­ing air­ports where new routes can be de­vel­oped or route fre­quen­cies can be in­creased. We be­lieve that this op­por­tu­nity is real and that this will drive the prof­itable growth of the in­dus­try and the econ­omy in In­dia. It is im­por­tant to re­mem­ber how­ever that to har­ness this op­por­tu­nity, the right tools will be needed. In our case, we see that as be­ing through the world’s lead­ing 70- to 130-seat air­craft, the E-Jet fam­ily.

BY 2020, THERE WILL BE MORE THAN 120 UN­DER­SERVED MAR­KETS WITH AN AV­ER­AGE STAGE LENGTH OF MORE THAN 1,000 KM

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