The Airports Authority of India (AAI) hopes to halve the "leakage" of passengers to hubs such as Dubai and Singapore, and could offer rebates to carriers who open new routes to India.
Speaking to Flightglobal at the AAI's headquarters in New Delhi, chairman VP Agrawal says Dubai is the key challenge on the hub leakage front, particularly on services to Europe and Africa. Singapore also channels US-bound traffic originating in India.
"We're working out why we have leakage traffic," says Agrawal. "Delhi and Mumbai are the main airports for hubbing, but we're also aiming for hubs at Chennai and Kolkata. We're serious about dealing with leakage traffic so that we can retain our market."
In June, India's ministry of civil aviation called for stronger international airport hubs within the country to stem the "leakage" of international passengers to major overseas hubs.
The ministry stated that international traffic originating or terminating in India for the year ended March 2011 was 37 million. Of this total, 22 million passengers flew directly to their destination, while 15 million connected through a hub outside India. Out of this 15 million, it said 11.4 million comprised "leakage" of passengers that could potentially pass through a hub within India such as New Delhi or Mumbai, as opposed to an overseas hub such as Dubai or Singapore.
Agrawal says he hopes to eventually recapture 50% of these passengers, but that aggressive pricing by Gulf carriers complicates the situation.
He adds that if the AAI "does the Kolkata hub right", it would help improve connectivity between India and Southeast Asia, and that Jet Airways is examining the possibility of launching direct flights to Australia.
In an effort to develop more international routes, the AAI is working on a concession model to help attract carriers, and has submitted a proposal to the ministry of civil aviation.
"We're considering rebates on landing and parking for three years to share risk with carriers," says Agrawal. "In the early stages of a route's development, everyone will be anxious about its growth. So why not share this risk until the route is built up? Then, when the route is successful, why not taper off to a normal level [of fees]?"
In regard to the future development of Indian airports, he says public-private partnerships is a key avenue for funding. For airports that fail to attract private investors, bond issues could be used.
He notes that while India has made good progress in recent years upgrading its airports - particularly major hubs such as New Delhi, Mumbai and Bangalore - there are still a number of airports in need of modernisation and improvement to meet a boom in passenger traffic across the country.
A great deal of this growth will come from low-cost carrier (LCC) operations, which Agrawal says comprise 70% of passenger traffic. He believes that both LCCs and full service carriers are best served by single, shared terminals.
"Low-cost terminals are a vexing issue in the sense that in an airport operation your major investments are in security and safety," says Agrawal. "You can't reduce the security costs for an LCC terminal. This is a fixed cost."
He notes that Singapore is demolishing its low-cost terminal and he believes air bridges speed up turnaround time.
"Do you really gain from low-cost terminals?" he asks. "The better option is to develop a terminal that is not fancy, but functional and allocate a small area for executive class. The low-cost terminal model is just not clicking."