Airlines tap big business in small cities

New Delhi: India’s smaller cities are creating more business than airline-saturated big cities. This could be seen from the economy airlines love for small cities like Patna and Guwahati.

The airport in Patna, one of India’s smaller cities and the capital of its poorest state, is so crowded that government authorities this year said they need to build another one.

The airport has seen the number of passengers, and daily flights, double in the last four years as the country’s largest carrier IndiGo Airlines and smaller rivals like GoAir seek to cash in on a surge in demand for air travel from smaller regions to offset losses on highly competitive “trunk” routes linking big cities.

Higher disposable incomes, an expanding middle class and rapid urbanisation have made India one of the world’s fastest growing domestic aviation markets, where passenger numbers are expected to grow by more than 75% in the next six years to exceed 217 million.

Much of that growth is expected to come from smaller cities like Patna, where more people are flying for the first time. Passenger numbers from these places have risen nearly 17% a year since 2009, compared to 7.6% from larger hubs, data from industry analysts CAPA – Centre for Aviation show.

That trend is set to continue as more airports are built in smaller cities. This month, Prime Minister Narendra Modi’s government picked five smaller cities to kick off a nationwide initiative to build about 50 new airports.

In keeping with the trend, the fifth largest carrier GoAir has now increased flights to and from Patna and other smaller cities. These regional routes make more money than the more congested routes between Mumbai and Delhi, said an official.

Flag carrier Air India’s regional unit is also looking at increasing its fleet to tap a larger share of this market, industry officials said. While more established carriers see regional travel as a way to counter the razor-thin margins and losses on big city routes, a crop of new airlines are catering only to regional demand.

For now, demand for regional travel outstrips supply, making the sector attractive for airlines. Air travel penetration in India remains small in global terms, with 0.04 annual trips per capita against 0.3 in China and more than two in the US.  

Industry analysts, however, warn that as more carriers pile into the sector, fares will fall and airlines will face the same pressure on yields as they do now on big city routes.