Indian airports turning into aviation hubs

According to Union civil aviation minister Jyotiraditya Scindia, the Indian government has initiated a plan to convert Indian airports into aviation hubs, starting with the Delhi airport, to ensure seamless connectivity and reduce connection time between flights. 

We are collaborating with stakeholders to explore how we can prepare Delhi airport to become a hub. A consultant will be employed to examine international standards and propose a course of action. Our goal is to create a concentration of airlines, streamline domestic to international connectivity with those airlines, and minimize the time between flights. We want to eliminate the unpredictability of arrival and departure times between flights,

 Scindia stated. 

The study will consider factors necessary for a hub, such as airline concentration, domestic and international connectivity, and minimal connection times between airlines, and will look at practices at airports such as Heathrow in London, Dubai, Doha, and Singapore. The report is scheduled to be submitted in the second half of 2023.

For international hubs like Emirates and Etihad in Dubai, Turkish Airlines in Istanbul, and Singapore Airlines in Singapore, it is crucial to have strong airlines with large fleets, particularly wide-body aircraft. In India, IndiGo and recently privatized Air India possess the largest fleet sizes and aircraft orders, which will support the country's hub plans.

IndiGo has a fleet of more than 300 planes and has nearly 500 aircraft on order, while the Tata Group-run Air India placed an order for 470 aircraft in February 2023, with options for an additional 370 jets. Although the wide-body segment in India currently accounts for only 13% of the major airlines' operational fleet, the government has been urging Indian carriers to acquire larger planes that can provide non-stop connectivity to distant destinations, as reported earlier by Mint.

As India has experienced a surge in passengers after COVID-19, and airlines anticipate a record number of travelers during the summer, the government has implemented measures to manage the constant increase in domestic demand for air travel. "We have surpassed our pre-COVID high of 420,000 passengers. Currently, we are at 456,000. Although we are not in the peak season, we have been averaging between 370,000 and 440,000 daily air passengers over the past month. Based on this trend, we expect to reach new highs again this October, so we need to prepare for it," said the minister. The government is also aware of the global supply chain problems that are causing delays in aircraft delivery timelines for airlines.

According to Scindia, the current situation is such that the airlines are operating at full capacity but facing a shortage of planes. Despite the challenges posed by supply chain issues, the government has taken steps to assist the industry, including reducing the value-added tax (VAT) on jet fuel. Currently, 31 states and Union territories have opted for a lower VAT regime of 1-4%, and discussions are ongoing with other states to reduce the high tax regime of 20-30%.

Jet fuel costs have almost doubled from pre-covid levels, reaching ₹1.07 lakh per kl, which comprises around 40-45% of airlines' cost structures. The high VAT rate of 30% further exacerbates the issue, making it essential for airlines to refuel in states with lower VAT rates.

Scindia noted that air travel penetration in India is currently only 3%, presenting a significant opportunity for domestic airlines. While Akasa Air has recently entered the market and holds a 3% market share, Jet Airways 2.0 is yet to make a comeback. The government has provided them with an Air Operator Certificate, but they have not yet confirmed the delivery of the five aircraft required within 12 months.