Is Surat the opportunity which airlines missed?

Estimates suggest that eight out of ten diamonds polished worldwide are cut in Surat. Some of the biggest names in Petrochemicals – Essar, Reliance, Shell, ONGC have business in neighboring Hazira which houses a deep-water LNG terminal and over a quarter of the total fabric production in the country is around Surat but the city with ninth largest population in the country has struggled to make its mark on the air map.

As Low Cost Carrier Spicejet announces a spate of connections from Surat, is it time to look if Surat is the opportunity which airlines missed?

Effective 1st June 2017, Spicejet will operate daily non-stop flights connecting Surat to Jaipur, Hyderabad and Goa operated by the Bombardier Q400 aircraft. A month later the airline will connect Surat to Kolkata and offer one-stop connections to Patna, the latest destination for the airline. The expansion is quick after re-instating services on Delhi – Surat from 26th March 2017.

Online pressure groups have been petitioning airlines to start operations from Surat for close to a decade. The protests have been creative as well as funny to say the least. However, a mix of local pressure, political force and willingness from the airline to see the sheer size of the market seems to have come together to give Surat its wings to fly.

Predictive analytics becomes difficult due to lack of past data. It then boils down to which airline has the risk appetite to go by empirical estimates and it was Spicejet. The airline, however, won’t have a large exposure. B737 operations comprise 3.6% of total Boeing operations and the flights to be operated by Q400 will form a little over 4% of total Q400 operations by the airline.

With a population of 46 lakh or 4.6 million the city houses more people than Jaipur or Lucknow which are state capitals of Rajasthan & Uttar Pradesh. Located equidistant between state capital Gandhinagar and country’s financial capital Mumbai, the city was always blessed with abundant railway connections – which has also contributed to the lack of air connectivity.

The cities brush with connectivity is old. Airlines promised, tried and then pulled out. Most of the times it was just promises without action. A new airport building was constructed and operational in February 2009 albeit minus the cargo complex. These were also the times when the second boom of Indian aviation was in full swing and many non-metro airports were undergoing a revamp.

Lack of connectivity led to a very unique plan being worked out by Air India and various bodies in Surat. A bank guarantee was offered to Air India and the airline could evoke the same if loads dropped below 80% or less than 134 in a 168 seater all economy Airbus A320. The evening A320 operations were complemented, then, by CRJ700 in the mornings. As the CRJ’s exited the fleet, the national carrier deployed the ATR72-600 and later introduced the A320 for the morning flight as well.

A group of diamond merchants acquired Madhya Pradesh based Ventura Air Connect and based both its aircraft at Surat to provide connectivity to Rajkot, Ahmedabad, Amreli and Bhavnagar.

6th November 2014 – The big blow 

Low cost carrier Spicejet started Surat operations in February 2012. The airline initially connected Surat to Delhi and Mumbai with non-stop flights, later re-jigging the network to offer double daily flights on Delhi – Surat with onward connections to Kolkata and offering a one-stop Bengaluru – Surat connection via Mumbai.

However, on that fateful evening, SG 622 bound for New Delhi hit a buffalo during its take-off roll. The 140 passengers onboard and 6 crew had a “miraculous escape” but the aircraft was severely damaged. With immediate effect the airline suspended all operations at Surat.

Challenges

The airport indeed has many challenges. Starting with the now repaired boundary wall, to fish farming nearby which attracts birds. The security being managed by state police instead of Central Industrial Security Force (CISF) is considered the biggest one. However, the regional connectivity scheme – UDAN envisions security with state police at airports under UDAN scheme, Surat is not one of them.

Once the runway expansion is complete, the runway will be 2905 meters while the apron can accommodate upto 04 A321 aircraft. 

International operations 

There have been talks of connecting Surat to Dubai. The bilateral agreement with Dubai has seen 100% utilization. If Air India or its subsidiary AirIndia Express has to start a flight to Dubai it will lead to some other sector seeing reduction in frequency in favor of Surat. I wonder how the commercial decision will be taken about this or this announcement is political in nature in view of impending elections in the state.

The airport had issued tender in late March for provision of customs and immigration counters at Surat Airport.

Is the traffic sustainable?

As flights increase and airlines stabilize the airport will start showing up in the “fastest growing” and “highest increase” category primarily due to lower base. The triple digit percentage increase in passengers will be lauded for sure but the real question is if the traffic is sustainable in the long run?

For flights to sustain in the long run it is important that flights turn profitable sooner than later. There were a lot of promises on connectivity from Amritsar before the election season and all of which seem to be buried silently. Will the same happen for Surat as Gujarat heads for elections soon?

Will the large population also get hooked up to flying like the rest of the country did in the last two years? Is the population mostly labor intensive or a fair mix of high paying executives and businessmen who would start taking flights to Hyderabad, Kolkata and Jaipur for work and relax in Goa in droves? It is certain that the sheer size of market, lack of slots at other airports and cut throat competition is taking a toll on yields and revenue and Spicejet seems to have tried a different strategy to establish monopoly markets and duopoly routes.

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