Today, we had a manager from a consultancy company talk to us about the airline industry. Apart from usual stuff like low cost vs full carrier, cyclicity of the industry, scope for consolidation, etc., one important thing that was mentioned is that most Indian operators have placed huge orders for aircraft. It is expected that by 2010, the number of aircraft in India would’ve grown by a factor of 4 (not exactly sure of this number).
The demand side economics are very clear. There is a huge untapped market for air travel in India and with air and A/C train fares converging, the current growth in demand will continue. Also, there seems to be a trend (started by Air Deccan) to expand the market geographically by way of flying into hitherto untapped towns and cities. So you have the huge surge in demand and huge surge in supply. Bliss, right?
Not quite. One thing most people tend to forget is that an aircraft is fairly useless without a strip to land on, or without a place to park for the night. Already we seem to be running into trouble in this regard. The newly opened Paramount Airways couldn’t be given the required parking space in Chennai and it has to hence operate from the less lucrative Coimbatore. And in most metros, we have long queues of aircraft waiting to take off at peak hours, early in the morning or in the evening.
It is very clear – we need to build up fresh airport infrastructure. And fast. And remember that airlines is an industry on which many other industries are dependent on. An efficient airlines infrastructure is mandatory to support economic growth. It is interesting to see what the government is trying to do about it.
A new international airport is being built in Bangalore. A new airport was recently built in Pune. The sale of the Mumbai and Delhi airports to private parties has hit a roadblock following some bad processes. Now it is being hinted that the Airport Authority of India itself might take up expansion plans of these airports. Steps are definitely being taken but the signs seem ominous. Lack of airport infrastructure might end up being stifling growth, both of the industry and the economy in general.
It would be useful if Praful Patel can take a look at the order books of the various (major and minor) airlines in India. And it is the government’s responsibility to facilitate (not necessarily spend) the creation of new airport infrastructure. Making some rough demand projections and the likely routes these new aircraft would operate on, it would be fairly clear what the bottlenecks are.
So what is to be done now? New airports should be built. In places such as Mumbai, Delhi, etc. With enough parking space and strips to last at least a couple of decades. The government need not play a very huge role in building these airports. They can be built on a BOO (build, own, operate) basis with the government being just a facilitator in the deal. And facilitating land acquisition of course (at proper rates, lest the commies find an excuse to stall the process).
Now the question is, will there be any takers. The booking of aircraft with Airbus and Boeing is across the board. All major and minor airlines seem to be seeing a major surge in demand over the next 5 years. Extending the logic, there will also be people who will see the profitability of new airports. And if the government conducts a fair bidding process, there will definitely be takers.
Let’s just hope that the civil aviation minister is listening!