23 October, 2012

Taxpayer's Palace in the Sky

- Public Sector Under-achings of India.

So what’s new about civil aviation in India? Or what’s old, considering it is celebrating 100 years since its inception in 1911 when the first commercial flight was flown by a French pilot Henri Pequet from Allahabad to Nain on 18th February. It was a Humber Bi-plane, a humble beginning for a nation which is waiting in line to realize its dream of flying the Dreamliners. The 58 day long agitation by Air India pilots over rights to fly the aircraft has concluded with the abolishment of the IPG, some travel benefits, and a 25% salary cut for employees due to losing PLIs. Five and a half years since the merger Air India has suffered total losses of over Rs. 28, 046 crore, and even today according to the MoCA, 74% of the integration process is complete, but manpower integration - the most important is still pending.

The Indian Government is trying to save the national pride with the help of a Rs. 30, 000 crore bailout package which will be used mostly for aircraft acquisition. Air India has only recently been snatched away of its privilege of the Right of First Refusal on foreign routes, which could earlier be operated upon by private airlines only after the flag carrier had first refused to do so.

Then there is the Airports Authority of India (AAI) which holds the distinction of managing the largest portfolio of airports in the world under a single operator – 126 of them (including 16 International) - of which only 13 are making profits. Hence the airport sector was opened up for private participation, and the five airports at Hyderabad, Bangalore Delhi, Mumbai, and Cochin which were modernized through PPP mode currently handle more than 60% of the air traffic in India. It is another issue that the MoCA and AAI have been indicted by the CAG of favoritism towards DIAL after a 353% hike in Delhi airport charges was allowed by AERA. The ministry defends the action as a response to increasing congestion and Rs. 17, 500 crore have been earmarked for AAI as per the PC Working Group Report for the 12th Five Year Plan, during which AAI will concentrate mainly on improving airport infrastructure in the N-E region and developing GAGAN to provide better air navigation services.

And finally there is the Pawan Hans with a fleet of about 41 helicopters - catering mainly to the needs of the corporate and oil sector. Rs. 1, 735 crore has been allotted to it for the next five years mostly for helicopter acquisition. The General Aviation market of India is growing too but in the shadow of commercial airlines. Few other employees are hoping for their king to catch a big fish, but the government policy of barring foreign airlines from investing in domestic airlines has brought Kingfisher on the verge of a shutdown. All this is old news, and so are the excuses like global recession, weak rupee, taxation and cost of fuel.  During July, 2012 when the global airline industry was recuperating and the Indian civil aviation sector was one of the worst performers globally, Jet Air ways and Indigo emerged as market leaders on the domestic front, and currently 59% of the market share is held by Low Cost Carriers.

India wants a ‘Palace in the Sky’ courtesy Air India, not its citizens. It might want world class airports but not at world class rates; and it definitely doesn't want to compromise on safety, in light of the recent fake pilot scam and CAPA warning to DGCA. Although India holds the 9th largest market share in the global civil aviation sector, its story has just begun. The MoCA has realized this and hence is being restructured on the lines of a Civil Aviation Authority. One can only hope that the new regulator has a new priority – safety and policy, rather than infrastructure and operations.


Read dissertation here: Roadmap for the Indian Aviation

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