Cape Times

India’s regional air-link scheme off to a flying start

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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.

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