‘Regional air connectivity will take some pressure off congestion’

As the aviation business wraps up another year, Peter Kerkar, Group CEO, Cox & Kings, looks at the months gone by, the highs and lows of 2017, and how the industry is faring. Excerpts.

What have been the highlights of the year for the airline industry?

What stands out the most this year is UDAN (the government’s regional connectivity scheme), which is going to be exceptionally good for India. It is a holistic scheme that covers a lot of ground for aviation. It’s good not just for the travel sector but also for the industry as a whole. Ashok Gajapathi Raju, Union Minister for Civil Aviation, has said that 88 airports will be made functional in 18 months. Regional air connectivity will take some pressure off congestion. In the second round, we are even seeing budget carriers such as IndiGo showing interest, which is positive.

This year, air traffic has grown, and India has become the third-largest domestic market, surpassing the UK.

In June-October, the industry carried 9.54 crore passengers, an 18 per cent increase year-on-year. The 2016 profit for the industry (the most recent figures available) was $120 million, which is reasonably healthy.

Also, the government has been planning Air India’s strategic divestment. When this goes through, the industry, particularly the private sector, will be more competitive.

Where do you think the industry failed to perform this year?

The biggest problem – related in a way to success – is the massive congestion at airports. We still have single-strip runways, we don’t have the right equipment to deal with weather fluctuations and the overlays in terms of planes coming through. I think UDAN will ameliorate some of this pressure.

Once you have a disbursement of traffic from metros to smaller cities, it will enable the government to take the pressure off the existing airports. We are the third-largest domestic market in the world after the US and China. Delays, passenger dissatisfaction, lower quality of services – these are the misses.

While UDAN’s intention seems right, we are struggling to build infrastructure on the ground. Do you foresee problems with implementation? Airlines that won routes in the first round of bidding have not been able to start operations yet

We can’t be too critical. This is about infrastructure development; it will take 5-10 years before we see the benefits filter through the system. An airport takes at least 2-3 years to build, then the surrounding infrastructure such as roads and hotels take longer.

As a passenger, I don’t think we can expect much improvement immediately. That the government is thinking of the next 15 years in terms of infrastructure is critical.

How do you think passengers benefitted in 2017? How much of an impact did GST have?

Passengers benefitted from improved connectivity. We also saw subdued prices for consumers.

A subsidised air fare is great for the market. At Cox & Kings we think the domestic market is going to keep growing. We expect it to grow around 11-15 per cent in domestic travel in 2018.

GST is here to stay. There was a temporary blip, but ultimately the economy and consumers have absorbed it.

We are not getting hit with a completely new tax; it is only replacing old ones and simplifying the structure. I think if you want the government to build infrastructure, you have to pay the taxes for it to do so.

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