NEW DELHI : The government has set in motion a plan to transform Indian airports into aviation hubs–beginning with the Delhi airport–to ensure seamless connectivity and minimize connection time between flights, Union civil aviation minister Jyotiraditya Scindia said.
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“We are working with stakeholders to look at how we can prepare Delhi airport to become a hub. A consultant will be hired to look at international comparables to see how we can go about doing that, so that is a work in progress,” Scindia said. “We need a concentration of airlines, domestic to international connectivity with that airline, and minimum connect time between those airlines. We need to ensure that the vicissitudes and the volatility in terms of arrival and departures between flights are flattened out.”
The consultant, which is expected to submit a report in the second half of 2023, will consider various aspects needed for the hub, such as the concentration of airlines, domestic to international connectivity, and minimal connection times between airlines. The study will examine practices at airports like Heathrow in London, Dubai, Doha and Singapore.
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Strong airlines with large fleets, particularly wide-body aircraft, are essential drivers for international hubs like Emirates and Etihad for Dubai, Turkish Airlines for Istanbul, and Singapore Airlines for Singapore. 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, with a fleet of over 300 planes, has nearly 500 aircraft on order, and the Tata Group-run Air India has placed an order for 470 aircraft in February 2023 with options for another 370 jets. While the wide-body segment in India currently has around 13% share in the operational fleet of major airlines, the government has been pushing Indian carriers to order larger planes which can offer non-stop connectivity to faraway destinations, Mint reported earlier.
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As India has witnessed a record number of passengers post-covid and airlines anticipate record travel during the summer, the government has also put in place measures to handle the consistent surge in domestic demand for air travel. “We have crested our pre-covid high of 420,000. Now, we are at 456,000. We are off high season, but we are averaging between 370,000 and 440,000 daily air passengers in the past month. The way I look at it, this October, you are going to be at new highs again, and so we got to plan for October,” he said, adding that the government is also aware of the global supply chain issues hampering aircraft delivery timelines for airlines.
“Now, we have a situation where we have our planes full, and we don’t have enough planes,” he said.
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While the supply chain issues will take time to be addressed, Scindia noted the government’s efforts to help the industry by reducing the value-added tax on jet fuel. Currently, 31 states and Union territories have opted for the lower VAT regime of 1-4%, with Maharashtra being the latest addition.
The ministry is in talks with West Bengal, Delhi, Assam, Tamil Nadu, and Bihar to reduce VAT from the high tax regime of 20-30%.
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“(Jet fuel) which is almost 40-45% of your cost structure, and if that has gone from ₹53,000 per kl prior to covid to ₹1.07 lakh per kl today, it has pretty much doubled your cost structure out and then you pay a VAT of 30% on that it is going to kill you. Therefore, you are going to go those states that have lower VAT rates and refuel there,” Scindia said.
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Air travel penetration in India is just 3%, and the airlines are aware of the opportunity, he said. This creates room for more domestic airlines in the country, with Akasa Air joining the market in 2022 and holding 3% of the total market. However, Jet Airways 2.0 has yet to make a comeback. “Our job was to give them Air Operator Certificate, which we gave them in May 2022, and they are supposed to get five aircraft online within 12 months. So, we expect them to make sure that they get those aircraft online, but as of today, we have not heard back from them,” he said.
