Are we finally ready for take-off?

As an airline CEO, and a founding one at that, I had the opportunity to experience — and learn from — almost every aspect covered by the civil aviation policy. After all, one has to understand the rules of the game before playing on the field. I also had the privilege of implementing best in class processes and practice to ensure organisation sustainability and progress. I count myself very lucky to have had an extremely receptive and patient group of regulators, and a government that encouraged me to debate every single aspect of the policy.

The much awaited civil aviation policy draft is finally out after 18 months of inter-ministerial and stakeholder discussions. That is a key positive right away. Everyone can focus on the business at hand. The anticipation and debate is palpable just by looking at the share prices of Jet Airways, Interglobe and SpiceJet, all of which jumped over 5 per cent after the Cabinet cleared the draft policy.

A lot of the focus will be on the ‘rock-star’ of this policy: the much talked about 5/20 rule which mandates that all Indian carriers must be in existence for five years and have a fleet of 20 aircraft before they can venture on international routes. This is an archaic rule which needed to go. It may have served a purpose when it was formulated and approved by the Cabinet but today it is not progressive and one that absolutely needed to change.

The new policy has changed the rule to 0/20, which means that Indian carriers can fly internationally once they hit a fleet size of 20 aircraft or 20 per cent of total capacity (in terms of average number of seats on all departures put together). If this sounds complicated and has you reaching for your calculators, trust me the various options considered internally prior to this were far worse.

It is good to see this rule changed, although I had hoped for an outright removal of this policy.

The Government has been focused on ensuring Indian carriers continue flying within the domestic market and its tier 2 and tier 3 routes. I cannot argue with that and, in fact, am a massive supporter of tier 2 and virgin routes.

I feel that the policy could have accomplished these pro-growth goals by incentivising airlines to fly to certain destinations or allowing certain exclusive rights instead. Again, considering that there were two very distinct opposing sides to the removal of the 5/20 rule and the Government wanted to ensure all views were heard and their broader goals were delivered on, it is a good compromise. I sincerely hope this rule will see a revision to full removal in the near future.

The growth in the aviation industry in the domestic market has been phenomenal as evidenced by our quarterly passenger loads which are record-breaking, coupled with analyst projections which predict us to be the largest aviation market in the world by 2020. More importantly we have a government that believes in development and has aggressive economic growth targets and promises. With this in mind, I believe we should definitely bet big on ourselves. (Trust me, as an insider I can tell you that international routes are not as lucrative as people tend to believe and we would face massive competition against established players with significant scale. I believe many domestic airlines would choose to be in the domestic market for commercial reasons).

As the guitar player to the lead singer (5/20) in the band is Regional Connectivity Guidelines which also went through significant debates. I have not seen much change here with the exception of Category 3 (low density routes) having been changed to 35 per cent of CAT 1 or high density routes and some re-categorisation.

There is still a lot of flux especially with the revised categorisation to apply from the winter schedule of 2017. As mentioned before, the Government is very focused on giving its citizens more connectivity and this is evident in its regional connectivity policy.

One of the biggest pain points I had was maintenance, repair and overhaul (MRO). We as airlines spend a significant amount on MRO. There are no shortcuts around this, nor should there be as there are significant safety and financial implications if it is not done. Due to the high taxes, we were forced to maintain, repair and overhaul our aircraft outside India. I really wish the Government could have taken a stronger stand here and forced a zero tax scheme or rebates; however, the policy only promises their persuasion with State governments. This has never worked well in my past experience.

On the operations front, allowing all domestic airlines to carry out self-handling allows larger carriers to optimise their manpower and productivity while encouraging newer carriers to build an efficient self-handling business.

Bilateral traffic rights are another key issue and the Open Sky policy proposition based on reciprocity makes sense. However, its implementation may be cumbersome and honestly a little less transparent given the criteria of 5000-km radius and 80 per cent utilisation of Indian carriers, and the allotment of the additional capacity entitlements to be devised through the recommendation of a specially formed committee.

There are two policy additions I liked a lot but will probably not get too much airtime. The first of these is the revival of old air strips as no-frill airports which is a no brainier in terms of asset utilisation, additional network options, boost to low cost travel and regional connectivity. Secondly, as an operator, I am very pleased with the single window system for all aviation related transactions and complaints by civil aviation regulator, the Directorate General of Civil Aviation (DGCA), which also includes real time safety tracking. This is again something that we needed to have caught up on in terms of global best practices. Hopefully with the proper implementation of these we would be on the right track to becoming a world class industry in the future.

I was delighted with the focus on aviation security, immigration and customs which are oft-ignored sectors. They play a critical part in airline operations, passenger experience and aviation as a whole. In all, it is a step in the right direction and while a lot more needs to be done, I am glad we are making headway in the right direction.

The writer was MD & CEO of Air Asia India

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