Flight Plan

What took off in domestic aviation, and what didn’t

Ashwini Phadnis | Updated on: Apr 16, 2019

How has the Indian aviation sector fared over the last five years? Ashwini Phadnis takes a look at the hits and misses

The five years of the Modi government saw a lot of attention focused on the civil aviation space. The period saw the domestic aviation market witnessing double-digit growth for 52 months in a row, there were some big-ticket announcements like the UDAN scheme, and there was the passenger charter meant to give more power to the flying public.

On the flip side, aviation infrastructure, especially air traffic management, did not keep pace with air traffic demand and towards the end of Modi’s term, all the private airlines were in the red, with there being uncertainty about Jet Airways’ future.

Given these developments, and now that the country is in the process of electing a new government, FlightPlan looks at aviation during the five years of the NDA government.

According to Diogenis Papiomytis, Global Program Director, Commercial Aviation, Frost & Sullivan, if one is to compare the state of the industry in 2019 vis-à-vis 2014, the five years have been a mixed bag.

“The Regional Connectivity Scheme and reduction of aviation fuel tax to 11 per cent helped airlines double air traffic in five years. However, the government failed to resolve many of the issues faced by industry stakeholders in 2014. Air India is still a massive burden to taxpayers, States continue to charge separate aviation fuel taxes and Foreign Direct Investment continues to be restrained,” he points out.

UDAN scheme

The jury is out on whether this was a hit or a miss. Flagged off in April 2017 by the Prime Minister, the scheme is meant to give people in tier-II and tier-III cities a chance to fly at a ticket price of ₹2,500. Airlines operating under the UDAN scheme have to ensure that prices of at least 50 per cent of the seats are available at ₹2,500 for one hour of flying.

According to Anshul Sethi, Vice-President and head of supplier relations, Thomas Cook India Ltd, UDAN has helped boost access and affordability.

For Daniel D’souza, President and Country Head, Leisure, SOTC Travel, 70 airports at new locations, additional second airports, and expansion of existing airfields (for commercial flights), all of which have been developed under the UDAN scheme, will prove to be an impetus for the tourism industry.

But for many, UDAN has not really been able to achieve what it was meant to. An aviation industry watcher points out that UDAN has not succeeded in making smaller operators successful. “Small operators like Air Costa, Air Deccan, Air Odisha and Zoom Air, which won the bids to fly on certain routes, have had to shut shop,” he says.

Passenger charter

This one was a hit. Announced in February this year, the passenger charter ensures that fliers’ rights are protected in case airlines delay or cancel flights. The charter states that if a domestic flight is expected to be delayed by over six hours, the airline has to offer an option of “alternate flight” to a passenger within that time, or refund the full price of the ticket.

The charter also states that if a passenger is informed of a flight cancellation less than two weeks before departure, the airline must offer an alternate flight or refund the ticket completely.

No-fly list

This was a miss. Introduced by the government in 2017 after a number of cases of fliers (including some connected to political parties) harassing the crew, it expected the airlines to list unruly passengers on their flights so that a comprehensive list of such people could be drawn, who would then be barred from flying on any airline in India.

After the initial enthusiasm among the government and the airlines, no one knows what happened to this list.

Divestment of Air India

This was a miss. The divestment process was announced at the end of March 2018. The government called for bids from potential investors to take a 76 per cent stake in the state-owned airlines. The Maharaja got no bidders.

The government’s decision to retain a 24 per cent stake, which it hoped to sell when the airline’s financials improved, was a dampener for investors. Then the government set up a special purpose vehicle to park Air India’s debt. It is still making an attempt to sell its stake in Pawan Hans Helicopters Limited and Air India Air Transport Limited.

Financial health

This was another miss as most airlines are running at a loss. Papiomytis points out that the financial health of the sector did not improve much over the past five years, with high fuel prices, a depreciating rupee and price wars between full-service and low-cost carriers leaving many airlines in a perilous situation. “The perpetual privatisation of Air India, possible collapse of Jet Airways and the credit rating downgrade of Indigo are indicative of industry-wide issues,” he adds.

Airport infrastructure

This was a mixed bag. New greenfield airports started operations in Kannur and in Sikkim. The government awarded the contract for second airports in many States, including in Navi Mumbai and Mopa in Goa. However, the Navi Mumbai airport is already running behind schedule and the announced date of commissioning has long passed.

The government could not oversee faster expansion of Delhi and Mumbai airports, which account for most of the air traffic flows in the country.

“The government boasts about getting rid of hand luggage tag stamps but is still stuck in the dark ages for boarding passes. Cargo needs a lot of work as there are no facilities at many of the top 50 airports,” points out an industry watcher.

Adds Papiomytis, “With regard to ground infrastructure, there has been progress in the development of new airports and modernisation of existing facilities. However, development plans are disjointed and driven largely by local State politics. There is no country-wide joint asset management strategy, resulting in the paradox of having many capacity-constrained international airports and dozens of underutilised ‘ghost’ airports.”

Published on April 16, 2019
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