Airport expansion plans: Experts say pandemic-hit sector needs to revive for idea to take off

ByNeha LM Tripathi
Mar 28, 2021 12:41 AM IST

The government has in the past four years made various announcements to construct or revive around 150 airports, including some airstrips, in the country

The government has in the past four years made various announcements to construct or revive around 150 airports, including some airstrips, in the country.

February saw 7.8 million domestic fliers, down 36.71% from the figures in the same period last year. (HT File)
February saw 7.8 million domestic fliers, down 36.71% from the figures in the same period last year. (HT File)

In the 2017-18 Union Budget, it announced the revival of 50 airports/airstrips at the cost of 4, 500 crore.

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Again on February 1, 2020, while presenting the budget, Union finance minister Nirmala Sitharaman announced the construction of 100 more airports under the central government’s regional connectivity scheme, Udey Desh ka Aam Naagarik (UDAN), by 2025. This announcement came a day before India reported its first confirmed case of Covid-19 in Kerala. While the government had started screening passengers from China/Honk Kong at Delhi, Kolkata and Mumbai airports from January 18, 2020 itself, by March, the procedure was extended to passengers from all the other countries across every airport.

As per the latest data made available, India’s domestic passenger traffic dipped to a seven-year low to 61 million in 2020, while the international passenger volume declined by 90.56% in the March-December period of last year as compared to previous years. As per DGCA report issued on March 17, February saw 7.8 million domestic fliers, which is 36.71% less as compared to the same period last year.

The decline in the passenger traffic has raised questions over the government’s ambitious airport expansion plans, though the ministry of civil aviation (MoCA) believes that its plans remain on track.

“The government’s airports’ expansion plan is a well-thought idea for future travel, and seems to be in the right direction. However, due to the Covid-19 pandemic, airlines are currently running into losses, which was unexpected. This could cause a delay in the actual implementation of these plans,” said a former Airports Authority of India (AAI) board member, on the condition of anonymity.

The pandemic has hit the aviation sector globally due to visa and travel curbs, and this has led to some airlines going out of business, while others are heavily trimming their operations. In India too, while the commercial passenger flight services on domestic routes were allowed from May 25 after a two-month halt, commercial passenger flights on international routes remain suspended till date since March 23 last year. This has, in turn, impacted the airports’ business and lower passenger traffic has not only squeezed their aeronautical revenue but also non-aero revenue.

Though domestic travel has gradually started picking up, the international traffic amid the ongoing restrictions is expected to take at least two years to get back to the pre-Covid times.

Passenger traffic at Asia-Pacific airports, according to the international airports body Airports Council International (ACI), is expected to return to the pre-Covid levels by 2023.

“The aviation industry has almost recovered, as people have started travelling by flights. Domestic flights are flying with over 90% load. Looking at the growing domestic travel, the government will come up with around 20-25 greenfield airports by this year,” said additional director general and MoCA spokesperson Rajeev Jain.

“Air connectivity across the country is essential, and the government is ahead of its plans to construct/revive airports/airstrips,” Jain added.

According to ACI, the recovery path in the Asia-Pacific and the Middle East regions will be slow and uncertain, with a diverse demand recovery pattern.

However, as per Asia-Pacific forecasts for 2020-2040, over the next 20 years, these two regions will be the fastest-growing globally, with the total passenger traffic expected to grow fast at a compound growth rate of 4.7% and 5.2%, respectively.

According to ACI Saudi Arabia, the United Arab Emirates, Iran, Indonesia, India, Vietnam, Philippines and China are among the top 10 fastest-growing countries by compound growth rate – from 2019 to 2040 – with over 50 million passengers.

ACI’s forecast, related to the recovery of passenger traffic, is under the baseline scenario, the global traffic is expected to recover to 2019 levels in 2024, mainly driven by the recovery of domestic passenger traffic, but slightly dampened by a slower recovery of international travel (globally, domestic traffic accounted for 58% of the total passenger traffic in 2019).

Domestic passenger traffic is expected to reach 2019 levels in the second half of 2023. With governments introducing more restrictive steps, creating new lockdowns and travel restrictions, it is going to severely hamper efforts to resume the pre-pandemic operations. ACI also said that in the long run, it is predicted that the global traffic may take up to two decades to return to previously projected levels (pre-Covid-19 forecast). A structural change (traffic never returning to pre-Covid-level) is also a possibility.

While the government is setting up goals for regional travel, the pandemic has brought in an unimaginable financial crisis in the sector.

In mid-January, aviation minister Hardeep Singh Puri minister said that the government had set a target of operationalising 100 unserved and under-served airports, besides starting at least 1000 air routes under the UDAN scheme, launched about four years ago, with a budget of 4,500 crore.

“The air traffic will bounce back in a year, after the vaccines prove successful. Although the idea of coming up with new airports is good and a much-needed one, the government should slow down its pace, as coming up with new airports is practically not feasible this year,” said VP Aggarwal, former chairman, AAI.

Pitching for connecting UDAN flights to the main city airports for better accessibility and reliability, Aggarwal said, “Sometimes airlines book slots, conduct inaugural flights and are not then able to fly as per schedule.”

The country needs airports like Jewar and Navi Mumbai for better connectivity to the new/smaller airports to operate in the regional connectivity scheme, he added.

According to MoCA, as many as 56 airports have been upgraded and over 700 air routes awarded, of which 311 routes have already commenced under the UDAN scheme.

“While the government has laid down an ambitious target of 100 airports/ airstrips by 2025, the level of achievement would depend upon their ability to mobilise resources through monetisation of the existing ones (in tier-2/3 cities as announced in the Union Budget) as well as the interest of private sector in participating in public-private partnership projects, which in turn are also linked to their ability to mobilise finances,” said Anupama Arora, vice-president and sector head for corporate ratings, ICRA Limited.

Overall, given the under penetrated air traffic market in India and the evidence of steady passenger traffic growth between financial year 2010-11 and financial year 2019-20, the growth prospects for aviation infrastructure in the long- term remains healthy, as the sector grapples with dampened traffic in the near-term on account of the pandemic, she said.

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