2019: Flying on a wing and a prayer

Ashwini Phadnis New Delhi | Updated on December 30, 2019 Published on December 30, 2019

Jet’s collapse, IndiGo’s Pratt & Whitney engine issues and fallout of Boeing MAX add woes to the industry

The civil aviation sector witnessed an action-packed 2019. The year began on a tragic note with two international flights of Lion Air and Ethiopian Airlines crashing, killing more than 300 passengers and crew members.

This led to the global grounding of the Boeing MAX aircraft in March, a move that had repercussions for Indian civil aviation, affecting SpiceJet and, to a lesser extent, Jet Airways.

SpiceJet had 13 such aircraft, of which, 12 were flying when the global grounding was announced, and Jet Airways had five.

According to Ankur Bhatia, Managing Director, Amadeus, Indian subcontinent, besides the grounding of the MAX aircraft, Boeing was also forced to stop production of this variety of aircraft, which led to worldwide disruption in supply to airline companies, including SpiceJet.

Jet’s troubles

Weeks later, on April 17, came another jolt. Jet Airways temporarily ceased operations after 25 years of operations, thanks to a huge pile of debt. Efforts are still going on to revive the airline.

“The grounding of Jet Airways led to an imbalance between fliers and flying capacity of airline companies,” said Bhatia. Aloke Bajpai, Chief Executive Officer and Co-Founder, ixigo, adds that Jet’s collapse and the reduction in seat capacity was one of the biggest deterrents to domestic travel growth in the first half of the year.

Two other private players — IndiGo and GoAir — continued to witness issues with the Pratt and Whitney engines powering their Airbus 320 New Engine Option aircraft. The engine issues, which led to shutdown during flight, saw the Directorate General of Civil Aviation cracking the whip and asking the two airlines to take corrective action.

The rift between Rahul Bhatia and Rakesh Gangwal, IndiGo’s two co-promoters, did not help as the two sides openly hurled accusations against each another. At the moment, the case is in arbitration at the London Court of International Arbitration.

Air India’s woes

State-owned Air India’s situation was no better. The government kept moving the deadline for issuing the Expression of Interest for its sale, even as Hardeep Singh Puri, Minister of State for Civil Aviation, told Parliament that the airline will have to be shut down if it is not sold. However, even now, there is no clear-cut roadmap on how this will be done.

What could muddy the waters for AI’s sale is the Supreme Court order, which says the airline’s financial woes should be addressed by the National Company Law Tribunal (NCLT) on a petition filed by a pilot seeking wage arrears that have crossed ₹60 lakh.

“Air India has managed to weather one more year. But at this rate of cash burn and no suitors on the horizon for its sale, 2020 looks bleak,” warns Bhatia.

In a muddled attempt to help the sector, the Union Budget announced the enhancement of foreign direct investment levels in civil aviation, and also spoke about creating an ecosystem for aircraft leasing. The creation of a leasing aircraft ecosystem in India is expected to give financial stimulus to the sector, as almost 80 per cent of the 600 aircraft that Indian carriers fly are leased abroad where they have to face ups and downs in international currency fluctuations.

However, nothing much is known or has been made public on the progress on both the fronts. For example, it is still not clear whether the FDI limit in civil aviation will be hiked beyond the existing 49 per cent, or whether the Budget announcement is only meant to boost the prospects for Air India’s sale.

In another move to ease the aviation business, attempts are also being made to bring aviation turbine fuel under GST, a move that will ensure a standardised rate of taxation across the country.

Perhaps the only bit of good news is from the airport sector, where the government extended the participation of the private sector in airports, with Adani Enterprises Ltd winning the right to operate and manage six airports, including Thiruvananthapuram, Mangaluru, and Ahmedabad.

Bajpai believes that the proposal for leasing of six more airports, including Tiruchi, Bhubaneswar and Varanasi through the Public Private Partnership being approved by the Board of Airports Authority of India, is a positive development.

During the year new airports were build and made operational at Hindon and Kalaburagi.

Published on December 30, 2019
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