After failing to fill up even three-fourths of their seats in 2012, airlines are hoping that the largely untapped traffic in tier II and tier III cities can revive their fortunes.

SpiceJet, an early mover, has had two profitable quarters in 2012-13 by increasingly deploying more capacity on non-metro routes. “Regional connectivity has been a focus area for us,” said SpiceJet CEO Neil Mills. “We do 110 flights a day now on our Bombardier Q400 fleet and we have seen a lot more traffic in the tier II and tier III cities.”

Jet Airways agreed that non-metro or regional routes are the future. “As good as our railway network is, it still doesn’t connect most non-metro cities,” said Raj Sivakumar, senior vice-president, alliances and planning. Sivakumar added that if one wants to go from Madurai to Raipur, there wouldn’t be a good railway connection; so airlines can step in to provide connectivity. “Non-metro routes can also help overcome the seasonal vagaries of the airline business in the domestic market,” he told FE.

The shift to smaller cities comes years after airlines had been scrambling for the lucrative metro routes. In the last three years, the Delhi-Mumbai sector has seen airlines deploy more than 50% of the overall seat capacity; the sector was also in the top 10 of the world’s busiest routes in 2011 in terms of passengers carried, a survey by Amadeus said.

Malaysian budget carrier AirAsia, which plans to launch a budget airline in India with the Tata Group, has even said that it will not fly between Delhi and Mumbai as it doesn’t make economic sense. Experts, however, are quick to point out that airlines are now increasingly eyeing the regional market because airport infrastructure is a lot better.

A recent study on regional air connectivity commissioned by the civil aviation ministry and carried out by Deloitte stated that 93% of total seat deployment in winter 2012-13 was between metro cities to smaller towns while routes connecting tier II and III cities and towns was only 7%. The two airports in Delhi and Mumbai are also among the costliest in the world to operate out of.

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