Reforms in the skies poised for a takeoff
Highlights
Last year, until November, the airlines carried nearly 29 million domestic passengers, which is a growth of 47% over the corresponding period of 2005. It is heartening to know that this growth involved a substantive expansion of geographic coverage of domestic air services; the scheduled domestic air services are now available to/from 75 airports against nearly 50 in 2000.
As a member of the Naresh Chandra Committee which chalked out a road map for the sector in 2003, I am glad to see that most of the key recommendations are either already implemented or in the process of being implemented. In a year or two, airports in four major cities ��� namely, Bangalore, Delhi, Hyderabad and Mumbai ��� are likely to benefit from private participation.
International air services segment received significant fillip as the government allowed domestic private operators to fly abroad and also consciously adopted a liberal approach in bilateral agreements with several countries including Japan, Kuwait, UAE and USA.
Notwithstanding the impressive growth in air traffic and the momentum on the reform front, the sector is facing significant challenges that need expeditious action. One of the immediate concerns is the mounting losses of the air transport service providers across all segments of the industry, i.e., full-fare, low-cost, public and private.
Such widespread financial stress does not augur well for the sector. Hence, the government should consider extending a helping hand through measures that could reduce the overall costs of the airlines.
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Another area that requires attention is the need for improving capacities and services in Kolkata, Chennai and several non-metro airports. Government has reportedly decided to modernise 35 non-metro airports to world class standards at an estimated cost of Rs.5,000-5,500 crore. While embarking on this laudable initiative, one should eschew the temptation to rely on simplistic civil works contracts ��� a method that proved to be unsatisfactory in the past and is usually fraught with the risks of time and cost overruns. In case the government wants to support some essential but commercially unviable air services, it should dedicate a stream of cash flows ��� like the cess on fuel in case of the road sector ��� and ring-fence it into a non-lapsable fund.
Finally, it is important to recognise that services under the control of an airport operator, though significant, form only a part of the air passengers��� overall experience which would include other segments like air traffic control, immigration, security and land side transport arrangements.
Accordingly, to ensure passenger satisfaction, the ministry of civil aviation, Airports Authority of India and private operators should enlist wholehearted support of the other arms of the government, like ministry of home affairs and state governments.
Deepak S Parekh
Chairman, HDFC
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