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UDAN: Infra bottlenecks clip airlines’ wings

Varun Agarwal | | Updated on: May 27, 2018
Mysuru Karnataka: 31-03-2017:fCommercial operation of flights to Mysuru will recommence under the Government's UDAN policy in due course. PHOTO:M.A.SRIRAM

Mysuru Karnataka: 31-03-2017:fCommercial operation of flights to Mysuru will recommence under the Government's UDAN policy in due course. PHOTO:M.A.SRIRAM

DGCA data find no jump in passenger traffic for airlines dedicated to regional linking

The Government’s regional connectivity scheme, which intends to put small cities on India’s aviation map, is yet to take off in a big way several months after multiple airlines started operations on the newly created routes.

While the overall domestic aviation sector grew over 26 per cent month-on-month in April, airlines working dedicatedly on the new routes barely saw any growth with only a few thousand passengers buying into the scheme so far.

Minimal response

In April, Zoom Air carried about 2,000 passengers, Air Odisha about 1,000 passengers, while Air Deccan ferried less than a thousand, according to data compiled by the Directorate-General of Civil Aviation. This is similar to what they had carried in March.

Infrastructure bottlenecks have left the highly touted regional connectivity scheme (RCS) a mirage, still. According to data compiled by Crisil, till February, only 20 unserved/underserved airports were operational of the 414 airports listed under the UDAN scheme.

“These 21 airports currently connect 43 UDAN routes allocated under Phase-I of the scheme. The number of operational routes is low compared to 117 routes allocated under UDAN Phase-I. This can be attributed owing to the lack of infrastructure at RCS airports, slot constraints at major airports and other operational issues faced by new players,” said Binaifer Jihani, Director, Crisil Research.

Cancellations

These airlines also faced heavy cancellations due to lack of manpower availability at airports, which shut down for maintenance.

Air Odisha had the highest cancellation rate of 45.6 per cent as it was unable to complete some of its routes as the Ahmedabad airport was shut for a few days in April. Zoom Air had 32.31 per cent cancellations, while Air Deccan saw 31.58 per cent of all its flights cancelled during the month, according to the DGCA.

Lack of pilots

“Several new airports announced under the scheme are not ready yet as there’s still a lot work that needs to be done. Involvement of too many agencies in the approval for airports seems to be delaying the process, but we hope things will get better soon,” said Santosh Pani, CEO, Air Odisha.

Another issue faced with some of the newer airlines such as Air Odisha and Air Deccan is the recruitment of pilots. Since the shortage of pilots in the country continues, most new operators are heavily reliant on foreign pilots. Airlines say that the government is taking 4-6 months to give approvals to foreign pilots to fly in India, which is resulting in delays for launching new routes for these airlines.

“We started operations in February since there has been an issue with getting approvals for the pilots we’ve hired from outside the country. Security clearance takes time for foreign pilots. The process of getting clearances from various ministries took us 3-4 months . Post that, we had to apply for visas for them. The whole process took nearly six months. We are expecting to get more pilots but the approval process is still underway for them,” Pani said.

Officials at Air Deccan, who did not want to be quoted, said there is a major capacity constraint at major airports such as Delhi and Mumbai. To make themselves profitable, the airline is forced to start routes that connect smaller cities to cities like Delhi and Mumbai but the limited slots available is posing challenges for them to complete trips on these routes on time.

“As RCS airports do not have the infrastructure for operation of ATR-42 aircraft or bigger than these, players are increasingly looking at smaller aircraft. For instance, the routes awarded to Deccan Charters and Air Odisha under UDAN Phase-I are currently operated by 19-seater aircraft such as Beechcraft 1900D,” Jihani said.

Crisil Research’s analysis indicate a typical break even passenger load factor (PLF) of 50-60 per cent at the EBITDA (earnings before interest, taxes, depreciation and amortisation) level on RCS routes on an average (even after considering the subsidies). For smaller aircraft such as Beechcraft 1900D, the break-even point will be even higher.

Despite this, while all major airlines had an average load factor of over 84 per cent, regional airlines were able to fill their aircraft much less. True Jet has a load factor of 80 per cent, Zoom Air stood at 75 percent, Air Deccan had a load factor of just 35 per cent, while Air Odisha had just 26 per cent.

Experts believe that while the scheme is great on paper, the government needs to pull up its socks on execution. Else, newer players will find it harder to sustain losses, affecting the entire scheme.

Published on May 27, 2018

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