India’s regional air-link scheme off to a flying start
INDIA scored a different kind of century earlier this week. The 100th airport in India was inaugurated by the prime minister at Pakyong, in the north-eastern province of Sikkim, on Monday.
Touted as one of the world’s most beautiful airports, Pakyong has already captured the imagination of social media as photos of the airport nestled among the breathtakingly beautiful hills were shared widely. Fliers will savour the unique beauty of Sikkim, home to the world’s third largest park, Kangchenjunga, and its stunning natural beauty when the first flight begins from Pakyong Airport on Thursday.
The airport, which has been carved out of a mountainside, will be the first airport in the province. An engineering marvel, the greenfield airport project is perched on a hilltop at an altitude of 1 430m with deep valleys at both ends of the runway (by way of perspective, Table Mountain is 1 085m above sea level). One of the five highest airports in India, Pakyong was nine years in the making, encountering delays on account of challenges like connectivity to site, adverse weather conditions, an earthquake in 2011 and a few protests by locals, which were amicably resolved.
Pakyong Airport is not a standalone phenomenon but part of a larger plan to connect small towns in India through affordable flights – Regional Connectivity Scheme “UDAN” launched in 2016. “UDAN”, literally meaning “flight”, is an innovative scheme to develop the regional aviation market in India where airlines bid for seat subsidies in a market-based mechanism.
This first-of-its-kind scheme in the world intends to create affordable yet economically viable and profitable flights on regional routes so that flying becomes affordable to the common man even in hitherto unconnected and off-thegrid small towns.
The scheme will ensure affordability, connectivity, growth and development for all stakeholders – citizens would get the benefit of affordability, connectivity and more jobs; for existing airlines there is the promise of new routes and more passengers; and for start-up airlines there is the opportunity of new, scalable business.
UDAN has a unique marketbased model to develop regional connectivity. Interested airline and helicopter operators can start operations on hitherto unconnected routes by submitting proposals to the implementing agency.
The operators could seek viability gap funding (a grant by the government to support projects that are economically and socially justified but not financially viable), besides various concessions from the government.
All such route proposals would be offered for competitive bidding through a reverse bidding mechanism, with the route awarded to the participant quoting the lowest viability gap funding per seat.
The operator submitting the original proposal would have the right of first refusal on matching the lowest bid in case its original bid is within 10% of the lowest bid. The successful bidder would then have exclusive rights to operate the route for a period of three years. Such support would be withdrawn after a three-year period, as by that time, the route is expected to become selfsustainable.
Affordability is the key virtue of UDAN; the fare for a one-hour journey of around 500km on a fixed-wing aircraft or for a 30-minute journey on a helicopter would be capped around R490, with proportionate pricing for routes of different lengths and flight duration.
In order that the operations are sustainable and profitable for the airline, a host of provisions have been built into UDAN financial stimulus in the form of concessions from local and federal governments and airport operators, concessions in the form of reduced duties and taxes, flexibility of code sharing at the UDAN airports, lower VAT (1%) on ATF (aviation turbine fuel or jet fuel), free provision of security and fire services and electricity, water and other utilities at substantially concessional rates, no landing or parking charges, etc. A regional connectivity fund has been created to meet the viability gap funding requirements under the scheme.
The Indian aviation sector contributed $15 billion (R211bn) to GDP in 2017/2018 and has been among the fastest-growing aviation sectors across the world. UDAN added to the growth momentum with its flying start. So far, UDAN route contracts connecting 56 unserved and 17 underserved airports along with 31 helicopter destinations have been awarded; 90 routes have already been operationalised. There are over 1 000 firm orders to procure aircraft by Indian scheduled carriers.
As Pakyong Airport stands to show in times to come, ease and affordability of connectivity serves to take the fruits of development to the remotest corners. UDAN is likely to a give a major fillip to tourism and employment generation in the hinterland and create an enabling infrastructure and environment for an equitable and sustainable growth.