BusinessLine@25

Aiming for the heavens

Ashwini Phadnis | Updated on January 27, 2019

Aviation has spread its wings over the past 25 years, but certain air pockets remain

The past 25 years have been marked by far-reaching changes in Indian aviation including the re-entry of private airlines, private partnerships in airports, and a huge leap in the market, with India slated to be the third-largest aviation market by 2022.

While the genesis of the changes can be traced back to Parliament repealing the Air Corporation Act in 1994 which led to the re-entry of private airlines, it was the 2003 report ‘A roadmap for the civil aviation sector’ — popularly known as the Naresh Chandra Committee report — that formed the bedrock for the reforms in the sector. Prepared by a committee chaired by former Cabinet Secretary Chandra, the report focussed on aspects such as air transport services, airports, air traffic control and the institutional framework for the aviation sector.

“We looked at the future of civil aviation for the next 30-40 years, and took a complete and comprehensive view,” says V Subramanian, member secretary of the committee

The most visible recommendation of the report, and the first to be implemented, was allowing domestic private airlines to fly abroad. This saw Air Sahara and Jet Airways launch international operations in 2004.

In the same year, low-cost flying took off in India with Air Deccan starting operations. Others followed, including current market leader IndiGo, SpiceJet and GoAir.

According to Kinjal Shah, Vice-President, Corporate Sector Ratings, ICRA, the Indian aviation industry has witnessed strong growth in all operating parameters. “Capacity increased by a compound annual growth rate of 10 per cent between FY1994 and FY2018; passenger load factor (capacity utilisation) improved to 84.4 per cent in FY2018 from 63.5 per cent in FY1994. This was supported by an increase in the number of private airlines to eight from five in 1994, and an increase in the number of aircraft to 622 as of March 2018 (from 101 as in March 1997).”

However, while the skies opened up and there was overall growth, some had their wings clipped. For example, Air Deccan was bought by Kingfisher, which eventually had to shut shop because of mounting losses. The market has only become more difficult with IndiGo reporting a net loss last year for the first time in its 10-year history, and Jet Airways, too, posting a net loss.

The GMR and GVK groups were awarded the right to develop Delhi and Mumbai airports. GMR was also awarded the right to develop the greenfield airport in Hyderabad, while GVK won the bid to develop the one in Bengaluru. Indian airports also won international laurels in these 25 years. Airports Council International ranked Delhi airport No 1 in 2015 in the 24-40 million passenger category and Jaipur came first in 2017 in the 2-5 million category. Of course, a single report can’t be credited with how the aviation sector has shaped up. Dhiraj Mathur, Partner and Leader, National Aerospace and Defence Practice, PwC, says the biggest change has been in the government’s mindset.

“It no longer thinks of aviation as a luxury sector for the rich. The perception has changed, accompanied by reality, because the sector has grown across social and economic classes, and consumer categories,” he says.

The latest step in this direction is the UDAN scheme launched in 2017, which aims to take flying to tier II and tier III with affordable fares.

The flight has also seen some clean and green steps. For example, Cochin International became the first fully solar-powered airport in the world.

However, some turbulences still remain. Air India and its huge losses is one among them. Two attempts at privatising the national carrier have come to naught, while the airline’s losses are mounting. The Centre has also not been able to make much headway in divesting its stake in helicopter service company Pawan Hans.

Published on January 27, 2019

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