How to develop India’s Low Traffic Airports
The Union Budget 2022-23 aims to encourage private participation in infrastructure development, along with public capital. This is exemplified in the focus on the PM Gati Shakti programme, an integrated approach towards building infrastructure for economic growth and sustainable development.
India has some of the biggest metro airports in the world. The Mumbai-Delhi route is one of the densest city pairs in terms of connectivity in the world. UDAN (Ude Desh Ka Aam Naagrik), a flagship programme of the Government of India, launched in 2016, has unlocked the potential of regional connectivity. Fifty-five airports and eight heliports have been operationalised in four years to connect 150 new city pairs. The number of airports is expected to rise from 120 to 220 by 2024. These new airports will be located mainly in the country’s remote regions.
Metro, regional, and remote airports require different approaches to financing and investment. India has around 219 unserved airports. About 70 of them are in different stages of development. A well-defined public policy framework is required to make these airports viable in the long-term. Economically viable operation and maintenance of these airports are crucial for their sustainability.
Remote airports cater to cities and towns with a catchment area of around one to two million people. These small airports can be categorised as Low Traffic Airports (LTA), with less than one million passengers per year. Many of these airports would be under the ownership of states that may not have the expertise and resources to develop and manage them. In the initial stages, traffic at LTAs would be via regional aircraft.
Considering the conventional revenue sources of airport — aeronautical services, airport services, and passenger service fees and revenue — could be around ₹1-2 crore per annum. However, given the regulatory compliances and service requirements, the cost for operating and maintaining an airport would be around ₹7-14 crore.
India’s current model for financing and investing in LTAs is largely State-supported. However, major metro and regional airports, which are profitable, find willing domestic and foreign investors. Here are six ways in which countries have considered making LTAs economically viable: One, viability gap funding. Under the Regional Airport Development Scheme of Australia, local governments support private airport operators by providing grants for augmenting infrastructure. Two, support by local communities. In the United States, the Small Connectivity Air Service Development Programme receives budgetary allocation from the federal government to help serve remote areas. Three, budgetary support or cross-subsidies. In Nigeria, the Federal Airports Authority cross-subsidises smaller but non-profitable airports from the revenue generated from bigger profitable airports. Four, clubbing LTAs. As part of its privatisation plans for airports, India is clubbing profitable airports with low or negative profitability airports. Such clubbing could create a remote-to-regional hub-and-spoke model for airports in an area. Five, unlocking the value of adjoining real estate. Nepal is considering bundling unprofitable airport activities with profitable airports, or possibly with property or commercial development opportunities. In India, states may bundle LTA with the commercial development of property. Six, revenue-sharing from profitable airports or air routes. In India, the Naresh Chandra Committee Report (2003) spoke about the creation of an Essential Air Services Fund for developing regional airports, including heliports in under-served/unserved areas.
Learning from these experiences, India needs to develop a novel model for LTAs, which could unleash investments and enhance the potential of unserved regions.