Picking the Right Aircraft

With a fairly exhaustive draft of the Regional Connectivity Scheme (RCS), the existing general aviation/business aviation sector (GA/BA) and regional start-ups can now plan out how they could optimally utilise their aircraft (both fixed and rotary) to connect India by air, like never before. The draft has made three categories: Category I (20 seats and below); Category II (21 to 80 seats); and Category III (81 seats and above). Operations under the Scheme would be permitted through fixed-wing aircraft (excluding sea planes 3) and helicopters.

The first window of opportunity is for the GA/BA sector which now can operate RCS flights on RCS routes. Many of the players have been complaining that restrictions till now were hindering them from operating partially as RCS flights. Whether it is a helicopter or a very light jet such as the Phenom 100 or the mid-range Embraer’s Legacy 500 or the large-jet Gulfstream G650 can be deployed for schedule operation when not used for charter operations.

Given the window of opportunity, the operators can now buy/lease aircraft to suit their operations. The original equipment manufacturers (OEMs) can now make appropriate marketing pitch for their aircraft, be it small aircraft used in general/business aviation; or the regional aircraft such as turboprops and regional jets. Picking the right aircraft is the first step to getting it right.

Turboprops, short-haul proposition

There are two major turboprop players in India – ATR and Bombardier. ATR is the market leader with as many as 35 aircraft in operation with different airlines, while Bombardier has 18 aircraft (15 DHC-800 with SpiceJet and 3 CRJ 700 with Airline Allied Services). Bombardier aircraft is being deployed by mainline airlines, mostly on secondary routes.

The ATR 72 is certainly the regional workhorse. International consultancy firm A.T. Kearney in a report has forecast that India’s regional aircraft fleet will grow from 55 in 2011 to as many as 261 by 2025, a compounded annual growth rate (CAGR) of 12 to 13 per cent compared to the projected 9 per cent CAGR for total fleet growth. There may be a slight upward revision to the projections considering that there is stepped up activity on the part of the government to create an ecosystem for aviation to literally take-off.

Drivers for growth

The drivers for regional aviation growth are many – one of them being the limited capabilities of airports. Of the 450 airstrips/airports in India, less than 100 airports can handle scheduled services. Of the operational airports, only one-third of it can receive narrow-body aircraft of Airbus and Boeing as most other airports have short runways. Many of the airports are getting modernised but they mostly will be able to handle regional aircraft in the medium term.

Turboprops are now being deployed on short-haul routes. The ATR 72 and Bombardier Q400, both 50- to 90-seat aircraft are dominant on routes of 500 km or less as they offer superior efficiencies and ability to land at airports with short runways.

Regional Jets on long thin routes

Considering the vast geographical distances in the country and also large-scale migration from small towns to cities, irrespective of distances, the need to connect long distances in quick time is being felt. Presently, long thin routes are connected by hop-over flights. Long thin routes are limited-demand long distance routes between metros and Tier-II and -III cities such as Chennai-Ahmedabad, Chennai-Aurangabad, Mumbai-Coimbatore, Bengaluru-Jaipur, etc. These long thin routes cannot be served by narrow-body aircraft as filling up seats will be an issue, while turboprops will not be able to handle the distance and economics.

LONG THIN ROUTES CANNOT BE SERVED BY NARROW BODY AIRCRAFT AS FILLING UP SEATS WILL BE AN ISSUE, WHILE TURBOPROPS WILL NOT BE ABLE TO HANDLE THE DISTANCE AND ECONOMICS

Regional jets are viable alternatives to turboprops on 500 to 1,000 km routes. Regional jets registered 19 per cent growth rate over the past decade and they are also ideal for 1,000-1,500 km routes. The aircraft that dominates the regional jet market is the family of E-Jets from Embraer. The Embraer E190/195 (and the upcoming E2 Jets), Bombardier’s CRJ900/1000 series and the MRJ and Sukhoi Superjets, all of which fall in the 70- to 130-seat category, a segment which looks very promising, considering that air travel is gaining rapid acceptance, thanks to low fares and the need to move distances in quick time. Now with the government putting a cap on airfares, this should further prop up the regional airline players.

Embraer forecast 100 E-Jets in 10 years time

Embraer in a presentation to ASSOCHAM recently indicated that there were 40 potential new markets without non-stop flights that can be served with E-Jets today. The sector would have 15 per cent higher yields than average and it was too thin for large aircraft and too long for turboprop operations. Embraer forecasts over 100 E-Jets in 10 years time.

Embraer stated that at present everyone was doing the same – concentrating fleet on large capacity aircraft; growing capacity mainly through increased frequency in existing markets; concentrating on traffic growth in Tier-I cities due to similar fleet profile; and competing fiercely which was eroding profitability. Now with government incentives and boost to regional aviation, the strategies are going to be redrawn and one can expect surge in activity.

RCS, window of opportunity

The draft RCS when finalised will open up a huge window of opportunity for new regional airline players to foray into the aviation sector; charter operators to optimally utilise their aircraft by deploying on RCS routes and also for mainline airlines to think of feeder possibilities on its trunk routes.

One of the first and foremost prerequisites for those entering the sector is to ensure that they get the business model right and accordingly deploy the right size aircraft. The scheme allows all kinds of aircraft ( fixed or rotary-wing) that could be utilised as RCS flight. The draft clearly states that an RCS flight is a domestic flight using a fixed-wing aircraft or a helicopter operated by a selected airline operator on an RCS route with schedule of operation approved by the Directorate General of Civil Aviation (DGCA). The draft says that an ‘RCS route’ means an identified pair of origin and destination airports/heliports within India satisfying certain conditions. At least one of the origin or destination points should be an RCS airport satisfying the definition of underserved airport or unserved airport or an RCS heliport and that there have been no scheduled commercial flights on such a route for the last two flight schedules. In the case of proposed helicopter operations, there should not have been any commercial operations, whether scheduled or non-scheduled, on such a route for the last one year. The stage length (as per flight path approved by DGCA) between the origin and destination airport/heliports is not less than 200 km and not more than 800 km, provided that, for remote areas: (1) hilly terrains of Jammu and Kashmir, Himachal Pradesh, Uttarakhand and North-eastern region of India, (2) Andaman and Nicobar Islands and Lakshadweep Islands, and (3) areas with security concerns as determined by the Ministry of Home Affairs; and for operations through helicopters, route with stage lengths less than 200 km between the origin and destination airports/heliports shall also be eligible to be considered as RCS routes.

The next five to 20 years will see improved regional aviation growth as the hinterland gets connected to the metros. Thanks to favourable government policies the growth of regional airlines is a given thing. It is only for the operators to benefit from the policies the government is putting in place.