Air Connectivity For North East: Why Addressing Structural Challenges Is Crucial

Air Connectivity For North East: Why Addressing Structural Challenges Is Crucial

by Satyendra Pandey - Thursday, July 30, 2020 04:00 PM IST
Air Connectivity For North East: Why Addressing Structural Challenges Is CrucialThe terminal at Lokapriya Gopinath Bordoloi International Airport, Guwahati (Kaustav/Wikimedia Commons)
  • Airlinks are critical to the North East from a strategic and development perspective, yet this connectivity issue has not been addressed properly.

    Stakeholders have to look beyond subsidies and meet structural challenges head-on to put this right.

An ethnically, culturally, and geographically diverse region, North East India is connected with the rest of the country through a narrow corridor of approximately 21 kilometres.

Within the North East areas, connectivity initiatives are underway, the most famous being the Bogibeel Bridge, that now connects Dibrugarh to Dhemaji supplementing the Kolia Bhomora Setu.

However, such projects have long gestation periods and are focused on intra-regional connectivity. As such, airlines continue to be the fastest and most economical way to drive connectivity. Yet there have been very few ventures focused on this aspect. Why is this the case?

Airlinks are critical to the North East from a strategic and development perspective. Between the seven sister states, currently, only 11 airports are served via six airlines.

Of this, Air India has the most significant footprint with 289 daily flights servicing 57 domestic destinations.

These include Guwahati, North Lakhimpur, Tezpur, Pasighat, Imphal, Shillong and Dimapur. Some of the flights are operated under an MoU (memorandum of understanding) with North Eastern Council (NEC) and get funding support.

Interestingly, the airline has not turned a profit for several years, and most recent estimates peg its losses from the North East operation in the range of Rs 200 crore.

Successive governments have attempted to address connectivity. And this has been a core focus area: politically, socially and economically. Yet despite a push and budgetary allocations, results have not materialised.

Partly because the core structural challenges which include cyclical demand, irrational cost structure and low passenger volumes have never been addressed. Yet, there is no more luxury of time. The North East’s integration with the rest of the country via air links now demands actions that are focused on outcomes and not inputs and rhetoric.

This connectivity challenge was partly addressed by the poorly thought out route dispersal guidelines (RDGs) in the 1990s. The policy mandated that for airlines compulsorily had to fly routes to destinations in the erstwhile state of Jammu and Kashmir and/or the North East (which included Sikkim in addition to the seven sister states).

But in a classic case of intent versus impact, airlines started including these routes for compliance rather than for connectivity as such most airlines included routes to Srinagar, Jammu, Guwahati and Bagdogra in their network that had higher demand.

Further, the structure of the networks was adjusted to ensure compliance.

When this did not quite work, the government in 2016 launched the regional connectivity scheme named the local connectivity scheme (popularly called the UDAN scheme).

A focused supply side initiative and the goal were to entice airlines to fly un-served and underserved routes via economic incentives. These included a reduction of charges and also cash subsidies for a portion of seats on the aircraft. The cash was generated from levies on passengers flying on core routes mostly between metro cities.

Put simply, it incentivised airlines to fly to unserved and underserved airports to connect all parts of the country. Yet, three years on and four airline failures later, the scheme is about to run out of funds.

In the four iterations of the regional connectivity (UDAN) scheme, UDAN1 did not see any routes in the North East; UDAN2 saw Tezpur, Jorhat, Lilabari and Pakyong being connected (Tezpur and Pakyong operations have since ceased); UDAN 3 saw Lilabari, Guwahati, Imphal and Dimapur routes flown but all are loss-making; and UDAN4 has now seen six airports from the North East listed as priority areas with an additional 23 airports that are unserved in the area. Several airlines have attempted to start in the North East without much success.

It is worth repeating that to address this issue; stakeholders have to look beyond subsidies and attack structural challenges.

While a comprehensive list is very exhaustive, the critical ones include:

Demand-Side Solutions

With current business models, traffic is the lifeblood of revenue generation. Thus smaller traffic volumes effectively mean that any airline venture focused on smaller cities in the North East will likely be challenged on cash-flow. Add to this woefully inadequate capitalisation, challenges with planning and operational hurdles.

Together these make for an extremely turbulent ride and low returns on capital. Yet strategic avenues geared at developing traffic, tourist footfalls and connectivity, remain unexplored.

Aircraft Types And Fit For Purpose

Connecting the North East requires aircraft that are fit for purpose. That is, a suitable aircraft that match the mission profile, routes to be flown and operational conditions.

Almost always, the choice is erroneously based on standalone metrics rather than a comprehensive set. And because operators are few and far between there is very little documentation on challenges faced and lessons learnt. Ventures often rely on advice from conflicted parties or even worse from manufacturers who are keen to enter the India market.

Aping The West And Force-Fitting Models

The skill of airline planning specific to the North East is one that has to integrate an understanding of the regional and consumer trends. These may or may not be similar to patterns seen in metro-cities. Plans have to be based on ground realities, and not a topical understanding of the market gleamed sitting on desktops. Add to that socio-political realities, and it is a complex challenge that has to be addressed wholly and not on a piecemeal basis.

Addressing The Lack Of Data

Serious investors look at a return on capital. This can only be established with robust inputs that require current and credible data. There is not only a lack of data for the region but also an unwillingness to engage by institutions at the centre.

Earlier in the year, investors reached out to DoNER and InvestIndia for data on traffic flows from the North East. Both organisations maintained that they do not keep such data instead redirecting to a one-page document on the state’s economic review.

Investors simply chose to deploy funds elsewhere. Such a nonchalant and casual attitude just doesn’t bode well towards attracting new investment.

Playing To Strengths

Finally, North East connectivity must be highlighted for the strategic importance it holds. While this is highlighted in many forums, the evidence on the ground remains sparse.

The region continues to have many unserved and underserved destinations, and without the ability to make day trips via air, there are evident impacts on investment and interest.

Connectivity drives commerce, and an air-route is still the fastest and in many cases, such the only way to link city pairs.

Further, the region has a rich diversity, culture and geography that is in a class of its own. Yet, this is not highlighted — in media, in discourse, policy or power (both soft and hard).

To attract private investment, policymakers effectively have to address all of these issues — and collectively at that. A region that is critically important to the country can no longer continue to want for connectivity.

This article first appeared in India InfraHub, and has been republished here with permission.

Satyendra Pandey is an India market expert and has held a variety of roles within the aviation business. His positions include working as the Head of Strategy & Planning at Go Airlines (India) and with CAPA (Centre for Aviation) where he led the Advisory and Research teams. He is also a certified pilot with an instrument rating.

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