The New Mumbai Airport
The New Mumbai Airport offers the best ever opportunity for the newcomers to level the playing field against incumbents.
The protest season is about to start, as the New Mumbai Airport gains traction. Expect even the corporate big-wigs to join just as they did when the New Bangalore Airport went online. And if you are overwhelmed with a feeling of Déjà vu, well, expect even more.
In the case of Bangalore, I expected that some intelligent soul, an industry veteran, people exposed to the world, Industry think tanks (such as CAPA), perhaps the Aviation press (if such a thing exists in India), would look at precedents around the world to suggest a solution. Because certainly, Bangalore's situation was not unique. Other cities around the world have been put through this dilemma of what to do with old infrastructure, once a new facility replaces it. Instead, we had a CEO of an IT company resorting to displaying placards and picketing outside the old Airport, in a cheap publicity stunt. Nobody even mentioned the Wright Amendment and the formula used to carve capacity between Love Field and DFW Airport in Dallas.
But this is not about Bangalore. This is about Mumbai. The situation is a bit different in this case, because Mumbai is so short of Airport capacity that both the new and the old Airport will continue to function ( and possibly the Juhu Airport will be made operational too for commercial flights). Given a chance, no airline would want to give up its operations at the old Airport and move to the new one, due to a number of issues- Distance from the city and lack of proper Airport transport in terms of a high speed train. Besides, cost of operation at the new airport in all likelihood is going to be far more than the old one. However, most certainly, some airlines have to shift to the new facility, as the old Airport is operating above its capacity and it's only going to get worse in the next few years until the new airport comes on line.
The central question then is: How would the authorities divide Airline operators between the old and the new airport?
In order to decongest the old Airport, will it require that some airlines be 'forced' to operate out of the new airport? And who will these be? All the foreign carriers, perhaps? Remember, discriminating between carriers on grounds of nationality is in contravention to the laws of EU and of ICAO and could seriously entangle the whole process into a legal fight.
Let us examine some similar case studies elsewhere:
Moscow has 2 Airports- one privately owned and home to most foreign carriers operating into Moscow, the other govt. owned (but proposed to be privatized soon) which is home to the home carrier and some other carriers from the so called 'Eastern Block'. Most carriers chose to operate from the private Airport, so there was no need for intervention.
There is the infamous case of Milan's Malpensa Airport. Italy insisted that routes carrying more than two million passengers a year should continue to use Milan's established Linate AirportLinate Airport (IATA: LIN, ICAO: LIML) one of the two major airports of Milan, Italy along with Malpensa International Airport. Due to its proximity to Milan compared to Malpensa, it is mainly used for domestic and short-haul international flights, with over 9. , because this would restrict its use to the Rome-Milan run operated by Alitalia, the Italian national carrier. Other Airlines were forced to use the poorly connected and untested new Airport at Malpensa.
There were also expected difficulties for passengers making onward journey into the city of Milan, as no rail or metro links from Malpensa to the City center existed. There were only bus services along an often congested motorway. Sounds familiar?
Another case in point: The London Air Traffic Distribution Rules came into effect on April 1 1978 and were applied retroactively from the beginning of April 1977. These rules were designed to achieve a "better" distribution of traffic between London Heathrow and London Gatwick, the UK's two main international gateway airports, to meet Government policy objectives of the time.
The 1978 London Air Traffic Distribution Rules (TDRs) stated that at peak times:
(a) Airlines that did not already operate an international scheduled air service from/to Heathrow prior to April 1 1977 would not be permitted to commence operations at that airport. Such airlines would have to use Gatwick for all their London-based operations;
(b) Airlines that did not already operate at Heathrow prior to this law taking effect could still commence domestic scheduled services at the airport provided that the BAA and the Secretary of State for Transport granted them permission to do so;
(c) All charter flights were banned from Heathrow as of 1 April 1978; and
(d) All new all-cargo, business and general aviation flights were banned from Heathrow and Gatwick from 1 April 1978.
All of the above examples indicate a formula to equitably and justly distribute traffic between airports in the same or similar catchment area. Mumbai does present a somewhat complicated situation, however, there are pointers to some solutions that I wanted to explore:
1. If you examine the slot division and capacity deployed, you will find that incumbent airlines such as Jet Airways and Air India control 1/5th of all slots available at Mumbai. Jet Airways alone deploys 20% or one-fifth of the seats available out of Mumbai Airport. This is little less than double of what an Airline like Kingfisher has. The situation is much the same in Delhi, if a little less imbalanced. This share is unlikely to change, as there is no more space left to grow.
2. Incumbent airlines like Jet Airways are far less likely to move out of the old airport, as they dominate the better slots, and therefore enjoy an advantage over their competitors.
3. Air India, in a business decision, decided to move its International schedule bank to New Delhi, as the new Airport allowed more flexibility to operate a hub and spoke network vis-à-vis Mumbai that is completely choked. Given that Air India's major stake holder and possibly its major customer as well, is the Government of India, it also makes good sense to be in Delhi.
4. Unlike in the 80's or 90's, the world's airlines are far more aligned into the 3 major alliances- Star, One World and Sky Team. In addition, the fourth major block is the so called MEB3- The Middle East Big 3-Qatar, Emirates, and Etihad, that remain non-aligned but have much the same strategies. India's own major carriers have chosen to align themselves- with AI becoming part of Star and Kingfisher becoming part of One-World. Jet Airways has been making aggressive overtures to both Star and Sky team, however, industry observers believe Jet will go with Star.
5. The newcomers like Kingfisher and possibly even Indigo and Spicejet therefore stand to gain the most out of the New Mumbai Airport. It offers carriers like Kingfisher, the best chance ever to level the playing field against the incumbents, differentiate the product and compete effectively. Take Kingfisher for example: it has been unable to offer a coherent hub and spoke network to its International flights, competing mainly for the point to point traffic, which has grown fast enough to keep them going. However, it is not going to justify building an International network, if you have no schedule bank to feed it. The advantage it may enjoy today on some short-haul International markets, is fast depleting, as the market fragments between more carriers coming on line. Sooner or later, they will have to evolve into a proper network carrier. Kingfisher must continue to tightly integrate with the one-world carriers (possibly even equity if the government allows it) It must continue to develop One world Alliance dependencies on its domestic and sub-continental network to such an extent that it must make it necessary for all one-world carriers to move along with it to the new Airport. The move to the new airport is not without risks, as it is dependent on support infrastructure. But there are advantages- such the incentives that the new Airport may provide to subsidize the move. In addition, it also opens up the very lucrative Pune market and the industrial belt cities of Maharashtra. Failing to do so, could result in Kingfisher being in the same situation as Virgin Atlantic today.
6. Kingfisher has also struggled with its fleet- having 2 different kinds of cabins even within the A320's required them to launch 2 brands- Kingfisher and Kingfisher Red. The new Airport offers them the opportunity to operate a hub and spoke network, while they can choose to operate the fleet configured for an LCC operation, out of their existing slots at Old Mumbai Airport. This will result in a split operation scenario driving costs somewhat higher; however, it will also allow division of risk and minimal disruption of cash flow. A smooth transition as far as the changeover to the new Airport infrastructure is concerned will take time to settle down and is not without risks. But do you have a better idea?
7. Finally, this would probably be the first time ever that Airport capacity is neatly carved out based on the 3 large alliances and Airlines operating within them. With AI calling Delhi its Hub, incumbent Jet Airways happier than ever at its old Mumbai Airport Den, and Kingfisher finally finding space at the New Mumbai Airport to transform itself into a true network carrier.
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