A strategic vision for Indian aviation

After the high drama that unfolded last weekend, with private airlines threatening to go on strike, it is time the country demanded from the prime minister a long-term strategic vision for Indian aviation.

The sector encompasses not just the passenger airlines but a whole gamut of industries including charter aviation, cargo airlines, cargo express logistics, aircraft manufacturing and ancillary industries ��� maintenance and repairs, and a host of other related industries.

Airlines are themselves partially responsible for the crisis they are in today, as they have failed to build a sustainable aviation model suitable for the country. Therefore, there is no apparent need for the government to bailout in terms of writing off loans.

At the same time, it is true that none of the government���s stimulus plans has any positive impact on the sector as they neither manufacture nor are beneficiaries of infrastructure development nor have a high service tax.

Therefore, a separate package needs to be given to the aviation sector as given to the rest of the Indian industry.
The airlines have to also tighten their belts, become more innovative and efficient, and simultaneously engage the government for policy initiatives at a much larger level, which addresses all stakeholders of the aviation industry.

A year ago, the airlines on their own fixed the airfares. If it had happened in another country, they would have been punished for cartelisation. But instead of the government taking action, consumers punished the airlines by not flying and the occupancies have since tumbled. The cartelisation takes place in our country because there is no comprehensive long-term civil aviation vision, and the competition commission is yet to function properly.

The reality is that the government is indifferent to the aviation sector, doesn���t consider it as core infrastructure and has chosen to tax it heavily. Then there is the existence of a huge, apathetic bureaucracy, monopolies like the DGCA, discretionary allotments, and corruption in various aspects of business.

On the operating side, congestion at metro airports, high airport charges, woeful warehousing capabilities and lots more bedevil the sector. These problems have existed when the airlines set up their businesses. So, the only thing the businesses can do is to innovate and run the airlines with ruthless efficiency and tight-fisted control over the internal costs.

The other reality is that only 2% of the population in the country is flying. Led by the low-cost revolution, it went up from 0.5% to 2% during the last term of Praful Patel as civil aviation minister. The rest 98% are still travelling by road and rail.

The empty planes obviously indicate that this 98% can���t afford the higher fares or are not willing to spend. Instead of targeting the 98% and stimulating demand in them for air travel, the airlines have initiated measures only to attract a small segment of the population, that is the 2% of the upper middle class, which is already utilising the services. The airlines have to target the rest of the 98% population to grow.

Globally, it is the low-cost airlines that are driving growth in the sector. They are run efficiently and are profitable, be it the Southwest Airline in the US, Goal in Brazil or Easy Jet and Ryan air in Europe. For a country like India, which offers vast potential, there are lessons to be learnt.

As to the role of the government, there has been no integrated approach towards the growth of aviation in India. Through the years, the aviation policies in the country have been drafted with individual sectors or businesses in focus: for the first 50 years, policies for the country were made to suit Air-India and Indian Airlines; more recently it appeared to be biased towards Jet Airways.

Now the new airport operators seem to be in favour. But eventually aviation has lost out and hence the pathetic condition. Praful Patel, one of our most dynamic civil aviation ministers ever, has cried hoarse through his last term, asking for support from the finance ministry, commerce ministry, oil ministry and state governments, none of whom report to him.

Therefore, I believe there is a role for the PM to play, as he can work with the respective ministries and draft a long-term strategic vision for aviation.

The PM needs to ask some fundamental questions such as what kind of aviation does an emerging economy need. What is the role of aviation in increasing the GDP of the country? What cascading effect does growth in aviation have on travel and tourism, employment generation, etc?

What role does aviation infrastructure play in ensuring an inclusive, equitable growth? Can India compete globally when only 2% of Indians can afford air travel? What impact does a vibrant aviation sector, especially cargo and express logistics, which are the life blood of an economy (only seven cargo aircraft in India compared to 100 in China) have on the various businesses ��� SMEs, large enterprises?

How much FDI can aviation attract? In the case of airports, public sector monopoly has been replaced by the dreaded private sector monopoly. Is this what we want for aviation in India?

It is a matter of shame that we have to send our aircraft to countries like Qatar and Singapore for maintenance where Indian engineers service the aircraft. Aviation companies refuse to set up base here due to high costs, high taxation, the red-tape involved in acquiring airport space, and laborious customs clearances.

So not only are we increasing costs for our domestic airlines who have to send aircraft abroad for servicing, but are also losing out on business opportunities of servicing the domestic aircraft and the other aircraft in the region.

Being an economist and a visionary, the PM with his innate ability to strategise is in the best position to rein in the states where required, and lead the discussions, clearly defining the vision and strategy. Then the task of implementation and delivery lies with the civil aviation minister.

After the deliberations, if the net result is that the focus area for India for the next 10 years is going to be different, then the same has to be spelt out, enabling the aviation sector to take appropriate measures to either defer new ventures, take a call on continuing existing businesses or move on.

(The author is CMD, Deccan Cargo & Express Logistics)