In the history of Indian aviation, January 31, 2014, would go down as a black day. Ironically, the Federal Aviation Administration of the US (FAA) downgrade of India happened in the month when the aviation world was celebrating the centennial of the world’s first commercial airline flight in January 1914. India now joins ranks with 15 other countries in category 2—including Bangladesh, Belize, Ivory Coast,
Congo, Gambia, Haiti, Nauru, Swaziland, Zimbabwe, etc. It is a humiliation that will take a long time to heal.
The FAA downgrade comes at a time when India was creating a positive investment climate in its aviation sector with several far-reaching reforms. The biggest game-changer was allowing 49% FDI by global airlines into Indian carriers. Others included—allowing entry of A380s, direct import of ATF, ECB for airlines and MRO, removal of import duty on aircraft parts, opening of India’s bilateral rights to LCCs, abolition of the aircraft acquisition committee, privatisation of leading Indian airports, etc. The downgrade may set us back by years.
How bad can it be?
Sanctions by aviation regulators under International Civil Aviation Organization (ICAO) norms, typically, have a domino effect. So far, thankfully, we haven’t seen a similar action in key regions like EU (EASA), Singapore (CAAS), Japan (CAB), UAE (GCAA), etc. There are, however, media reports highlighting a likely increase in scrutiny of Indian aircraft landing in these countries. That may affect airline schedules and upset passengers may opt for other airlines.
Should a global downgrade happen, the outcome could be significant for India. The benefits of Air India joining the Star Alliance may diminish since its alliance partners may be prohibited from doing code-shares with it. Jet Airways' plans to
expand its global footprint through the Abu Dhabi hub may suffer.
IndiGo and SpiceJet may not be able to expand their international services. Start-up airlines like Tata-SIA and AirAsia may not be able to fly international even if the 5/20 rule is abolished.
The global downgrade may negatively impact our airports, air cargo, MRO, general aviation, tourism and hotel industries. The global bids for airports in India may be affected. Aircraft lease rents and