The domestic aviation industry has in the last five years seen its highs and lows. The opening of the sector to newer players created certain problems for the sector like excess capacity, infrastructure constraints and irrational pricing which hit the bottomlines of airline companies. The global financial crisis in 2008 further aggravated the problem with passengers limiting air travel. Even as the airlines are coming out of their worst period in recent times they are seeking financial relief from the government. M Madhavan Nambiar took charge as aviation secretary at a time the industry needed government support the most. He played a key role to ensure that the national carrier Air India regain its financial health. In an exclusive interview with FE?s Nirbhay Kumar, Nambiar talked about issues faced by the aviation industry. Excerpts:
Has there been any positive change in Air India’s financial health? When is the airline due to get the next round of funding from the government?
There has been increase in yield. Revenue has gone up. We have taken a lot of measures. The government has already infused Rs 800 crore into the airline as equity. We would approach the Cabinet by August-end for providing another Rs 1,200 crore to the airline. They have met several revenue targets set by the group of ministers (GoM) to be eligible for getting financial assistance.
The airline is implementing a turnaround plan which contains a lot of components. While some of them require a one time action many of them are in the nature of a continuous process. The company is trying to achieve mile stones set for them reasonably well. For example, a decision to appoint COO has been implemented. Five independent directors of repute have also been appointed by the government to the AI board. We are closely working with the finance ministry and financial institutions to do a sort of debt restructuring for the airline.
Other private carriers are also struggling. Kingfisher, for instance has approached banks for restructuring of its debt. Would you take up the airlines? debt issue with banks?
The issue of restructuring of loans pertaining to some private airlines is between banks and respective carriers. There is no proposal on the part of civil aviation ministry to extend financial assistance to private airlines. Having said this it’s also a fact that airlines are key players in the sector. Poor financial health of airlines have larger implications as it could affect air transportation. But restructuring of debt is something which has to be done by banks.
Any development on relaxing the foreign direct investment (FDI) norms for airline companies?
No firm decision has been taken on this issue as it involves assessment of various factors having implications for the sector as a whole.
Some of the aggressive foreign airlines like Fly Dubai and Air Asia has been pushing for more seat entitlements. Till recently ministry was going slow on negotiations. What is the ministry’s stand now?
Bilateral air service agreements are based on the principle of sovereignty of nations, nationality of carriers and reciprocity in which a balance of opportunities and benefits are paramount. The approach of the ministry as regards traffic rights is to ensure a judicious balance of the interest of passengers, airlines, airport operators and the interest of trade, tourism and economy of the country. Also, pacts on traffic rights is a continuous process. It is entered into with various countries depending upon traffic requirements after undertaking a complete analysis of the market. There is no change in approach on this matter.
Following slowdown the air traffic has started growing fast. What is your medium and long term outlook of aviation industry?
Upside potential of Indian aviation industry is huge. India is set to become the fastest growing civil aviation markets in the world. Recent estimates suggest that domestic air traffic will be in the range of 160-180 million passengers per annum in the next 15 years from about 40 million now. During this period international traffic will exceed 80 million. As per an assessment of the overall outlook of the sector in 2020 the growth of India’s aviation sector has a potential to absorb an investment of over $120 billion. The sector is estimated to create 3 million direct jobs.
But how would you ensure that the required infrastructure in line with growth?
Improvement of infrastructure facilities to ensure smooth air transportation is a continuous and an on-going process. It would be undertaken based on the operational requirement of safety of aircraft operation and the expected traffic growth. Apart from restructuring and modernisation of IGI airport Delhi and CSI airport Mumbai through PPP mode, measures have been taken to upgrade 35 non-metro airports in the country.
While aeronautical assets at these non-metro airports are being developed by AAI (Airports Authority of India), city side development of airports is to be taken up through private sector participation. The government has also accorded in-principle approval for setting up 11 greenfield airports in states like Karnataka, Maharashtra and Orissa.
