Thursday, March 15, 2012

India - Small airports are the next big thing: Experts

HYDERABAD: Small airports are part of remedial plans to resuscitate the ailing Indian aviation sector and, not surprisingly, 'non-metro airport' was the buzzword at India Aviation 2012.

During a panel discussion on Thursday, queries on the subject of small airports was eloquent testimony to the growing interest on this business model.

Umesh Kumar Baveja, founder and chairman of Regional Airports Holdings International Ltd (RAHI), a company that is developing two non-metro airports, at Gulbarga and Shimoga, had to request for off-line questions when the discussion on 'Roadmap for Civil Aviation: turbulence and recovery' wound up before lunch as he was inundated by questions from the audience.

Counting on the growth potential of an Indian market that is expected to have 300 million passengers towards 2020, industry players are exploring various business models in different domains. In the wake of these developments, it would safe to say that the sentiment on non-metro airports is bullish.

The Indian aviation sector, currently catering to 64 million passengers, including domestic and international passengers, has 135 airports at a time of burgeoning demand, considering the passenger outlook for 2020.

The market is estimated to grow to have over 1,000 airports by 2020. About 500 of these would be non-metro airports. While big airports are coming up with altogether different dynamics, the small or 'non-metro airports', have greater opportunities, experts said. "Considering factors encouraging the idea of non-metro airports, we can easily say 'small is beautiful.' Investment is small and therefore the risk, too, is small.

"No-frills and low-luxury are the differentiators for non-metro airports. This differentiator results in lower overheads that in turn makes the return on investment (ROI) more attractive," said Captain Gopinath, the pioneer of low-cost airlines in India and among the first to espouse the idea of small airports.

"Tapping the aviation market in tier-II and tier-III cities is a different ball game altogether. The financials are different and the revenue model is unique. You can't measure it by the same yardstick used to measure the biggies, so the game is not exactly easy," said Umesh Kumar Baveja.

According him, the capital cost to develop a Greenfield non-metro airport is Rs 200 crore while the operational cost is Rs 10 crore per year.

And it can be further reduced by smart technology and a simple revenue model. While the expected air traffic is a mere 45 aircrafts a week, the revenue depends on both aeronautical and non-aeronautical factors including landside development.

For instance, in Gulbarga, out of 700 acres of land, 350 acres is used for airport development, while another 350 acres is being utilized for landside development that includes setting up of an international aviation academy. 

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