Why The Aviation Industry Of Punjab Failed To Develop?

By Singh, Published on May 8th, 2022 in Blog

The Northern Indian state of Punjab with a population of more than 30 million people (over 3 crores), spread across 50,362 square kilometers area in 22 districts, 77 Tehsils, 12581 villages and 236 towns. Along with this, a huge number of Punjabi diaspora is settled across the globe, mainly in the continents of North America, Europe & Australia.

With regards to aviation industry in past over 4 decades, whether it be the United Kingdom, Canada or most recently Italy, the state has continued to prove its business potential for a number of international air travel markets. But, despite the huge potential for the state to develop as an important international hub for the airlines, the aviation industry of Punjab has failed to develop itself so far.

The short sighted vision and non-strategic development of the industry in state, are some of the reasons for international air travel markets to completely leak away from the state itself. For instance, according to an estimate, about 35-40% of Delhi’s total international traffic in the year 2019, originated in Punjab.

While today, the state may have over five airports, each in the cities of Amritsar, Jalandhar, Ludhiana, Bathinda and Pathankot, but only one of them has most viable business potential in the state, that is Sri Guru Ram Dass Jee International Airport, Amritsar. It has good domestic and international connectivity.

What are the reasons the aviation industry of Punjab never really took off? How this caused a great impact on the economic development of the state? And what are the ways ahead to get this industry back to a positive climb? Here’s an outlook of this neglected industry of the state.

Building Runways, But For Whom?

The economic development of a city depends upon various factors, one of the most important being the development of its own airport, as it brings the business, trade and tourism for the city as well as the neighbouring regions. It can be termed as “economic engine for the region”

In the past 16 years, there have been over 4 new domestic airports set-up in the state, at Pathankot, Ludhiana Jalandhar and Bathinda (all of them are basically civilian enclaves in air force bases), while at present a new so called “international airport” is being developed in Ludhiana, and another one is being planned in future to come up around Jalandhar.

For a quick reference, Ludhiana, is also know as Manchester of India, is the industrial hub of Punjab with a population of nearly 1.9 million and Jalandhar, the third most populous city of the state with population of over 1 million people.

While the aim of the previous state governments would probably have been to develop these cities across Punjab, through building airports, but it always failed to understand the complex factors involved in development of the airports, including the commercial, financial and technical viability of the same.

All the new airports have been built in the state during last 16 years, have proven not to be commercially and financially viable for the airlines in the past, and they still continue to do so.

Pathankot Airport (IXP), built in the year 2006, was operational for just over two-and-a-half-years until 2011, than after a span of over 7 years in the year 2018, commercial flights under the Regional Connectivity Scheme (RCS) resumed once. But at present this airport once again remains deserted.

The airport at Ludhiana (IATA: LUH, ICAO: VILD) operational at Sahnewal air-strip with commercial flights started in the year 2010, was operational for just over 3 years until 2014. While, after 3 years in 2017, the airport once again become operational, but only to be deserted again in April 2021.

The same scenario prevails at Jalandhar and Bathinda airports. Jalandhar Airport (AIP) is civilain enclave at Adampur air base was constructed in the year 2015, had its first commercial flight in the year 2018, but flight operations were suspended in April 2021. Similarly, Bathinda Airport (BUP), was built in the year 2012 as civilian enclave on Bhisiana air base, had its first commercial flight in the late 2016, suspended flight operations in March 2020.

The Government owned regional airline, Alliance Air, was the only airline which served all these airports except Jalandhar, with its lone and regional ATR-72 aircraft in its fleet, while Jalandhar airport at Adampur was served by SpiceJet. One of the common reasons observed for the suspension of commercial flights from all the above airports, was the low traffic demand.

According to the data available, from the FY2015-16 to FY2020-21, all these airports reported a collective loss of over ₹77.95 crores or about $10.4 million, with Ludhiana Airport reported highest loss of over ₹32.17 crores, followed by Bathinda’s with ₹22.82 crores, Pathankot with ₹16.69 crores and Jalandhar (From FY2017-18) with ₹5.97 crores.

The Dilemma Of New International Airports

For even an airport to be built, there needs to be presence of a stable market, but while all the above airports had the potential to develop as regional and domestic airports, it was probably the failure of the sucessive state governments, to understand the complexities involved in making an airport viable and successful.

At present a new international airport is being built at Ludhiana and another being planned in Jalandhar, which would be again causing the already debt laden Punjab exchequer, a fortune, but why?

The building of a runway and a terminal, cannot be called an international airport. For instance, the Government of Punjab, spent over ₹939 crores or (equivalent to US$160 million in 2020), from the state exchequer, to build the new international terminal at Chandigarh, which was completed in the year 2015.

For reference, Chandigarh is a Union Territory and the capital of the states of Punjab and Haryana. The Government of Punjab owns a 24.5% stake in Chandigarh Airport.

Ever since then, the airport had continuously failed to attract any international carrier or even the Indian carriers for exploration of new international routes, but is just limited to connectivity with Dubai & Sharjah in the UAE. This was even after the State Government introduced various lucrative incentives for the airlines for exploration of new international routes out of the airport.

But what are the practical reasons, the international airports at Ludhiana and Jalandhar, would not again be a failure for the Government of Punjab? And how these airports could be developed in the future?

Agreements, Viability And Proximity

The airline industry is one of the most regulated industries across the globe. International or even domestic airlines of a country just cannot operate from anywhere to anywhere, and have to follow certain rules and regulations in various levels of their business, including the decision of operating routes, any airline wants to operate on.

For any international airline to operate to/from cities across India, it has to abide by the Bilateral Air Service Agreements between India and their home country.

But what are Bilateral Air Service Agreements?

A bilateral air service agreement (BASA) is concluded between two countries and liberalizes commercial civil aviation services between those countries. The bilateral air services agreements allow the designated airline carriers of those countries to operate commercial flights to/from the designated Point of Call’s (POC). These agreements also sometimes regulate frequency and capacity of air services between countries, pricing and other commercial aspects.

One of the primary reasons, Jalandhar and Ludhiana won’t see any international carriers landing there anytime soon, is the non-inclusion of these airports in the Bilateral Air Service Agreements with most of the countries across the globe, including the Middle East, Europe and even North America.

Even for the Indian carriers, which foresee most of the long-haul international markets of Punjab as un-viable, including of Amritsar and Chandigarh, the commercial and financial viability of both Jalandhar and Ludhiana would be highly doubtful for them.

One of the other important reasons would be, the proximity of these airports. For reference, the distance between Jalandhar and Ludhiana is just about 61 km. Also, both of these cities are just under 100 km from the existing international airports, with the distance between Jalandhar and Amritsar being about 80 km and Ludhiana and Chandigarh being about 100 km.

Neglecting The Real Potential

While the previous state governments were busy spending the tax-payers money building airports across Punjab without any vision and strategic planning, interestingly, since the past 16 years it is all being done at the cost of development of Sri Guru Ram Dass Jee International Airport, Amritsar, which does not only truly holds the business potential to develop as a secondary international hub in the Northern India after Delhi, but also pave a way for development of other airports in Punjab.

In the early 2000s, Sri Guru Ram Dass Jee International Airport, Amritsar was an ever-developing airport. The airport was directly connected with a number of major international destinations including, London, Birmingham, Toronto, Singapore with Indian carriers including Air India and Jet Airways and served by elite international carriers, including, Singapore Airlines as well.

By the late 2010, Amritsar had lost much of its international network, due to introduction of various new policies by Air India and Jet Airways to develop their international hubs only at Delhi and Mumbai in India.

The next major hit the airport got was that, in early 2011-2012 when India was renegotiating BASA’s with a number of countries, Amritsar was not included in the expanded Bilateral Air Service Agreements that were updated with the Middle Eastern countries except Qatar, and a majority of European countries, including France, Germany, Italy, etc. It was another negligence of the previous state governments to not push for inclusion of Amritsar as POC’s for those countries, which if had been done, could have completely changed the present scenario of the aviation industry in Punjab.

While during the same time period, the other states, including Kerala developed its aviation industry with a strategic planning. In 2018, it become the first state in India to have 4 “real” operational international airports. It is important to note that, the than state governments of Kerala had got included their airports, including at, Trivandrum, Cochin and Kozhikode in the Bilateral Air Service Agreements with most of the Middle Eastern countries including the UAE. Today all the major Middle Eastern airlines, including Emirates, Flydubai, Kuwait Airways, Jazeera Airways, Oman Air, etc have a good presence at those airports.

Developing Amritsar Airport: Way forward to Develop Punjab and its other Airports

The state of Punjab is already under debt of over 3 lakh crore or over $40 billion. The Aviation Industry in Punjab was never considered a major industry, but with a proper vision and strategic planning, according to an estimate, this industry could generate more than about ₹10,000 crores both directly and indirectly per annum for the state exchequer.

The development of this industry in the state, begins with the vision for development of Sri Guru Ram Dass Jee International Airport, Amritsar, as the secondary international hub in the Northern India after Delhi.

Whether it be the international markets of the UK, Italy, Canada or Australia, the airport has always proven itself to be commercially, financially and technically viable for direct connectivity with these markets, but what the airlines require is a good business environment and freedom to work in a cordial business environment.

While in the past, the Indian carriers may not have foreseen long-haul international market of Punjab as viable for them, but only Amritsar has continued to prove this wrong. To further make this market more viable for the Indian airline carriers, reduction in state taxes should be one of the primary objectives. The most important objective being the inclusion of Amritsar in the BASA’s with Middle Eastern countries including UAE, and European countries, including France, Germany, Italy, etc.

Since the past decade, a number of international carriers, including, Emirates, Flydubai, Jazeera Airways, Oman Air, Turkish Airlines, etc have shown their keen interest for commencing operations from Amritsar, but the non-inclusion of Amritsar in bilateral air services agreements with these countires is the only hindrance for that.

The other most important objective would be enhancing public transportation connectivity from the airport to major cities across Punjab and neighbouring states for expansion of the catchment areas, rather than connecting those major cities with Delhi Airport. With government bus connectivity between cities of Punjab and Delhi airport, while the state exchequer may have been earning some profit, but it itself is failing to develop potential business opportunities for long term and losing a large share of revenue from taxation etc.

Altogether with this, the development of a major Maintenance, Repair and Overhaul (MRO) at Amritsar airport, would further boost the working opportunities in the region and the state and also boost the revenues for the state exchequer as it could not only serve for the Indian carriers, but even for the Central Asian carriers.

With an expanded international connectivity, it would further boost the tourism, trade and business for the state, which in turn could also boost the Foreign Direct Investment (FDI) in the state as well.

Eventually, as the Amritsar airport fully saturates, than turn for the development of new airports arrives. Also, this would make the markets of Jalandhar and Ludhiana more commercially and financially viable now for domestic and even medium-haul international connectivity, with an exponential increase in traffic demand.

In the outset the state government should realize that rather than building new civilian terminals or planning new airports first the resources at hand where large amounts of tax payers money has been spent, should be fully devloped and their potential must be fully realized before moving on to new plans. It is in best interest of the state to work in tandem for helping in development of Amritsar airport as world class airport.

About The Author

Ravreet Singh is a young blogger with an avid interest in aviation business. His goal is to become an Airline Business Professional. He possess good research, and analytical skills, keen interest in gaining insights and knowledge about various aspects of commercial aviation. He is the youngest team member of FlyAmritsar Initiative, a public advocacy campaign working for better air connectivity & sustainable development of Amritsar.

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