Breakeven Passenger Traffic for Regional Indian Airports

Abstract

Most of the regional airports in India are financially unsustainable because of low and fluctuating passenger traffic. Despite double digit passenger traffic growth since past four years, most regional Indian airports are yet to achieve financial sustainability due to high fixed operating costs and low non-aeronautical revenue. The Indian government is putting special emphasis on regional air connectivity through UDAN (Ude Desh ka Aam Nagrik) scheme. However, it is difficult to ascertain whether such schemes can ensure airport profitability. This paper attempts to find the operating breakeven point in terms of annual passenger traffic for 27 regional airports over a period of three years from 2014-15 to 2016-17. The method used is simple linear regression of operating revenue and operating cost with passenger traffic. The method as well as findings have been corroborated with relevant literature. The breakeven point changes 0.8 million passengers in 2014-15 to 0.6 million passengers in 2016-17. Most regional airports in the sample have more than 0.5 million passengers per annum and this paves way for smaller and upcoming airports looking for incentive schemes to attract airlines.

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