Sunday, July 21, 2024

Why India needs aviation hubs

Civil aviation minister Jyotiraditya Scindia’s plan to create multiple aviation hubs in India is a welcome move. It would benefit not only airports and airlines but the entire Indian economy.

If India is to house thriving multinational companies, both Indian-owned and foreign-owned, it is vital that direct air connectivity from the country to any corner of the world be readily available at short notice. That is not the case right now.

Singapore, for example, connects to most important destinations in the world directly, making it attractive as a hub of global business in the Asia-Pacific. Indians who seek to fly to any of the destinations of growing vitality in Southeast Asia, Oceania and East Asia right now find it more convenient to fly to Singapore and take connecting flights from there. That layover in Singapore could be done away with by converting Delhi, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad and Kochi into major aviation hubs.

India needs aviation hubs not just for international connectivity but also for easy access to the country’s far-flung regions. India is a large country, with an area of nearly 3.3 million sq km, the seventh most expansive in the world. It needs many more airports and more air connectivity to allow its economically mobile population to travel freely and easily to even the far reaches of the country. This calls for multiple hubs and spokes to strike the right balance between distance travelled and cost of travel.

It is possible, in theory, to have direct flights from, say, Delhi, to every major town with an airport in the Northeast. But the passenger load on every flight may not justify frequent direct flights. But converting, say, Kolkata, into a hub for the Northeast would allow large, economical aircraft to carry all passengers from Delhi to the Northeast to Kolkata, from where they could board smaller craft headed to various destinations in the Northeast.

The hub-and-spoke model would call for large investment by airlines in carrying capacity. The large fleet acquisition plans of Air India and Indigo even play out in bilateral relations between India and the likes of the US and the European Union. Creation of aviation hubs has the potential, therefore, to increase India’s diplomatic heft as well.

Another way to enhance capacity is for domestic airlines to enter into code-sharing arrangements with foreign airlines. India’s large airlines would be well-advised to both expand their own capacity and form alliances with global airline majors to ensure that no passenger who wishes to book a flight to anywhere in the world has to turn to a non-Indian airline.

Apart from increased connectivity for passengers, there would be ancillary benefits from the creation of aviation hubs. One is easier transportation of freight from India to the rest of the world. This is essential for the expansion of high-value exports such as electronics, fresh fruit and vegetables, high-end designer clothes, blueprints and pharmaceuticals.

These hubs could also serve as major centres for maintenance, repair and overhaul of aircraft, not just for Indian airlines but others as well. MRO is a line of economic activity that would leverage India’s plentiful supply of technical and engineering manpower and relatively low labour costs. Thus, the creation of aviation hubs would generate jobs not just in the hospitality and retail sectors already associated with core aviation activity at airports, but also in the technical sector of MRO.

Creating aviation hubs is more than an expression of ambition. It calls for appropriate policy, regulation and taxation. The tax treatment of expensive machinery brought in temporarily to assist in MRO has been a bone of contention in the past. Creating an efficient ecosystem for aviation hubs calls for coordination between multiple ministries of the government – aviation and finance in the case of taxation, and aviation and skills training in the case of creating manpower.

Scindia has demonstrated his ability to make the government work across silos with the successful campaign to reduce the tax on aviation fuel, which calls for coordination with different state governments. More power to him as he moves to convert his vision for aviation hubs in India into a bustling reality.

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