Lack of infra, ATF prices acting as drags

Written by Ankur Bhatia | Updated: Nov 15 2011, 09:58am hrs
The Indian aviation industry has been one of the fastest-growing aviation industries in the world regardless of the current upheaval that the industry faces. Currently, India ranks ninth in the global civil aviation market.

Looking at the 18-20% growth in passenger traffic in 2010 and domestic travel growing in double digits post-slowdown, the induction of capacity by airlines has not kept pace. As a result, peak demand season saw a reduction in supply, which led to huge fare hikes. This was compounded by the fact that a good number of aircraft are grounded instead of being used to increase capacity.

The basic challenges the Indian aviation industry is currently faced with are primarily infrastructure and aviation turbine fuel (ATF) prices.

The development and growth of any sector and economy is directly dependent on the growth of its infrastructure. Several airlines plan regional sub-units, but lack of developed airports is blocking the growth. Development of new airports faces hurdles such as acquiring adequate land at appropriate locations with good connectivity options. There is clearly a shortage of trained and skilled manpower in the sector as a consequence of which there is cut-throat competition for employees which, in turn, is driving wages to unsustainable levels.

There is a growing need to set up a comprehensive strategic education and training agenda for the national air transport sector. Airport infrastructure needs to be upgraded to world-class standards with priority to the busiest airports and those handling international flights. It is time to remove non-core activities from the aviation ministry and the government can begin by making the operations of the Directorate General of Civil Aviation, Air India, air traffic control (ATC) and the Airports Authority of India completely autonomous.

The regulators and operators need to fill the critical vacancies in ATC urgently, and implement proposals to reduce flight separation timings from the current two minutes to one. India is poised to become the fastest-growing market in the world for aircraft maintenance, repair and overhaul services over the next decade, tripling its worth to $1.5 billion as airline companies buy more planes to cater for the countrys rapidly growing traffic.

Another significant challenge faced by the industry in India is rising ATF cost, which increases increase pressure on airlines, resulting in the higher fares. ATF as a declared good will bring about a reduction in sales tax rates from the current levels of around 24-25%.

Other proposals the government may consider include aligning air transport policy with a broader agenda of national economic growth, including a coherent and consistent road map for air travel and air freight; reducing the cost of ATF; and, recognising that aviation today is an important element of infrastructure, rapidly upgrading airport infrastructure.

India is going to continue to grow at a macro level. I still feel that we are just at the beginning of huge growth that one will see in aviation in India over the next 20 years. Looking at the current not-so-happy scheme of things, it is difficult to predict what the industry will look like in five years. Ten years ago, none thought of the industry being what it is today. There are enormous growth opportunities in the market, provided the basic challenges are being improved upon and with an ever more active role played by all the stakeholders towards that effect.

The writer is executive director, Bird Group, a travel technology service provider to airlines