The buzz around the Hyderabad International Airport is growing — and is likely to get louder as more airlines move to the southern city to use the airport as their hub. Besides benefits for airlines and the airport, this will also mean more domestic and international flights, and greater connectivity for flyers.

In January this year, IndiGo started its ATR operations from Rajahmundry to Hyderabad with a two-times-a-day flight and one-direct frequency each on the Rajahmundry–Bengaluru–Rajahmundry and Rajahmundry–Chennai–Rajahmundry sectors. In June, the airline added Tuticorin to its network when it announced that with its 10th ATR aircraft it will operate three daily non-stop flights between Chennai and Tuticorin.

“Just like Hubli, Tuticorin is a key market for IndiGo and is fast gaining prominence as a crucial industrial hub. With rising business and tourism stemming from the southern cities, IndiGo is determined to provide the best travel experience to all those who wish to fly to these destinations,” Sanjay Kumar, Chief Commercial Officer, IndiGo, had said. (Sanjay Kumar will leave IndiGo on July 15, the airline announced on Monday)

Following IndiGo’s footsteps, SpiceJet is planning to add both Boeing and Q400 aircraft to its base in Hyderabad. In March, SpiceJet had two Boeing and six Q400 Bombardier aircraft and the airline then felt that there was quite a bit of scope to increase these numbers.

The airport also features in AirAsia’s expansion plans. Amar Abrol, the former Managing Director and Chief Executive Officer, Air Asia, told BusinessLine recently that the airline is considering making Hyderabad another hub sometime next year to add to its existing bases at Delhi and Mumbai. AirAsia is also looking to expand its domestic operations and possibly provide overseas connectivity from Hyderabad.

Why Hyderabad?

At the moment, on an average, GMR Hyderabad International Airport handles 480 + flights daily. As per the Airports Authority of India’s (AAI) statistics for FY2017-18, Hyderabad International Airport is ranked 6th in passenger traffic and 5th in air traffic movements. The airport has an ultimate capacity to handle 80 million passengers per annum with more than 5 lakh air traffic movements per year.

There are various reasons why Hyderabad is emerging as the new hub for airlines, the most important of which is the lower air turbine fuel (ATF) prices being offered by the Telangana government. In March this year, during a function to mark 10 years of the GMR Hyderabad Airport, the Telangana Industries and IT Minister K.T. Rama Rao announced that the State will slash Value Added Tax on ATF to 1 per cent, from 16 per cent.

The Minister made the announcement after the civil aviation industry had collectively raised the issue of lowering VAT on ATF at the Hyderabad air show, which concluded days before GMR airport celebrated its 10th anniversary.

The aviation industry is reacting positively to the Telangana government’s move. “States that reduce taxes the most will make it more viable for airlines to put aircraft into their States,” says SpiceJet promoter Ajay Singh.

“We are in a great space where there is this competitive federalism happening in our country. Everybody is trying to push for planes for connectivity offering various advantages and benefits,” Singh told BusinessLine . In such a scenario, Telangana seems to be the first off the block.

Reasons galore

Industry watchers say that IndiGo’s decision to make Hyderabad its base for its ATR aircraft was also driven by the fact that North India is affected by fog during the winter season (the Delhi-based, low-cost airline inducted its first ATR aircraft in December last year).

Then there is also the issue of having enough space for airlines to park their aircraft. According to a June 2017 study by the Centre for Asia Pacific Aviation, Indian carriers have ordered over 1,000 aircraft which are to be delivered over the next few years, making India the third largest market after the US and China. Airlines are now looking at airports where they can park these aircraft. Since Mumbai and Delhi airports are finding it difficult to find new slots for airlines to add flights from these two metro airports, Hyderabad becomes a viable option.

Then there are also situational advantages that Telangana, and Hyderabad in particular, enjoy. Abhijit Mishra, Country Manager India, Kayak, a fare aggregator and travel metasearch engine operated by Booking Holdings, points out that Hyderabad is strategically located, which gives it a unique opportunity to service south, north-east, north and west India with one to two-hour flights. Lower ATF prices will add to airlines making use of the State’s situational advantages. “ATF is a significant part of the total operating costs of domestic carriers and lowering VAT will bring down ATF prices,” he says.

Good news for flyers, Hyderabad airport

In good news for flyers, SpiceJet officials maintain that, “there is going to be a definite spike in flights. No question about this.” SpiceJet gives the example of its operations from Bagdogra which jumped by almost 60 per cent after the West Bengal government slashed the taxes on ATF, from close to 30 per cent to zero.

All this means good news for Hyderabad airport as well. The arrival of more flights will bring in job opportunities for the local people apart from the need for technical experts like aircraft engineers, ground handlers, taxi and car operators to ferry those arriving and departing from Hyderabad, and more hotels to accommodate the growing number of passengers arriving there.

No fall in fares

The only flip side is that all this activity led by drastic cuts in VAT on ATF is unlikely to lead to any consequent drastic fall in air ticket prices. “Airlines are already facing pressures owing to high operational costs, lack of cash reserves and already existing low fares. Hence, they will try to absorb any reduction in VAT to ease operational cost pressures,” Kayak’s Mishra says.

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