A year of turbulence for the aviation sector

Ashwini Phadnis

NEW DELHI, Dec. 25

AFTER being in the news for the better part of 2000 because of the disinvestment of Indian Airlines (IA) and Air India (AI), two developments ensured that the civil aviation sector generated equal interest in 2001 as well.

The first of these was the grinding halt of the disinvestment process and the second, the attack on the World Trade Centre in New York on September 11. Both these developments had devastating fallouts on the civil aviation sector.

The abrupt halt of the disinvestment process meant that the image of the country in the international community took a beating.

After all, the AI disinvestment saw some of the biggest and well-respected names in the global aviation industry like Singapore Airlines, Emirates and the L.N. Mittal group tying up with British Airways and Qantas.

Similarly, the September 11 incidents hurt the financial fortunes of AI, which could not operate air services to America for at least four days due to closure of airspace. This resulted in a loss of Rs 8.5-10 crore.

Further, with declining traffic, AI has decided to curtail services to the UK/US, Japan, Singapore, Hong Kong and Muscat.

The airline has estimated that the total loss of revenue on account of the September 11 attacks works out to about Rs 250.12 crore.

However, AI was not the only airline affected by the events. Due to declining international traffic, several airlines discontinued their services to and from India.

While, US carrier Northwest withdrew service to and from Delhi, United Airlines withdrew operations from the country. Gulf Air withdrew three flights between Bahrain and Mumbai and the Canadian carrier, Canada 3000 deferred its plans and recently closed down.

The domestic sector also felt the pinch of these negative developments. The attacks saw the insurance cover for all airlines including those in India head northward.

To cover the increasing cost of reinsurance, most domestic airlines slapped a Rs 250 surcharge from November 1 besides a 15 per cent surcharge on inland air travel tax (IATT).

But what probably hit the domestic airlines industry the most was the dip in the number of foreign exchange paying international tourists.

In an irony of sorts, the two negative developments also brought some good news.

For IA, it meant that the long-awaited fleet acquisition plan could finally take off. There was also the silver lining that in the aftermath of the worldwide slowdown and cancellation of sale order of aircraft, IA could hope to get lower rates for the aircraft it planned to purchase.

The airline has already benefited to the tune of $15 million over a five-year period, as it was able to renegotiate a deal for leasing Airbus A-320 aircraft.

The Government also chipped in, with the Finance Ministry indicating that it would make available Rs 325 crore as seed money for IA to purchase aircraft. IA has indicated that it plans to purchase up to 40 aircraft over a five-year period.

Besides, to provide greater air connectivity to regions in the North-Eastern part of the country, a decision was taken to float global tenders for dry leasing up to six 50-seater ATR 42-500 aircraft.

More good news came in the form of more passengers travelling by air than before. The two major domestic airlines - Jet Airways and IA - were again reporting carriage of around 20,000 passengers daily towards the end of the year.

The year was a fruitful one for the private sector airlines also. Jet Airways was finally able to get permission to import five new-generation Boeing 737 aircraft. It plans to import a mix of next-generation Boeing 737-800 and Boeing 737-700 aircraft.

Similarly, AI has also taken more Airbus A-310-300 aircraft on dry lease and is examining the feasibility of operating non-stop services between India and interior points in the US through the polar route.

Besides, in an effort to shore up its bottomline, AI has taken several steps including closing offices abroad.

In a shift from the past, the airlines decided to utilise its own aircraft to transport Hajis to Saudi Arabia, which would help it earn substantial revenue. Earlier, AI would charter aircraft for this purpose. AI has also set up an expert committee to examine its fleet acquisition plan. The committee has been asked to complete its report within three months on the airline's long-term fleet renewal and expansion plan.

The Government's decision to be liberal in granting air services rights to international airlines to enhance connectivity to and from India saw the German airlines, Lufthansa, launch direct services between Bangalore and Germany.

The Dubai-based Emirates launched services between Dubai and Hyderabad, while Cathay Pacific launched services between Delhi and Hong Kong. Silk Air, a subsidiary of Singapore Airlines, launched services on the Singapore-Kochi sector.

As in the past, in 2001 too the Government decided to be liberal in granting international airlines the right to operate additional flights or bring in bigger aircraft during the festive season so that passengers get air seats easily.

On s grim note, on September 30, a small aircraft carrying the former Minister for Civil Aviation, Madhavrao Scindia, crashed killing all passengers on board.

The Government immediately ordered a high-powered committee to look at technical aspects of smaller aircraft operating in the country.

It also began work on completing the civil aviation policy which is likely to allow foreign airlines into the domestic sector and increase the limit on foreign direct investment inflow into the sector.

On a lighter note, the Maharaja achieved a dubious first - Mr Michael Mascarenhas achieved the inglorious feat of being the first Managing Director to be suspended while still in office.

However, he had the last laugh when he had to be reinstated for just two days prior to his retirement, as the case registered against him was not considered tenable by the Central Bureau of Investigation (CBI).

Besides, there was the infamous `hijacking that was not' incident in the dead of the night on a New Delhi-bound Alliance Airways aircraft.

Despite the ups and downs of the year, the true potential of the sector is yet to be fully unleashed.

The Government and the industry need to do a lot to reduce fares and increase connectivity so that airlines in India can truly become carriers of the masses instead of being the carrier of a particular class of people.