By Vivek Lall
Indian aviation has great underlying potential, however the market continues to under-perform due to structural issues, with business models of almost all the major carriers under stress.
The fiscal and cost environment in which the civil aviation sector is operating has turned particularly hostile at present as a result of stubbornly high fuel prices compounded by a sharp depreciation of the Rupee and a punitive ad valorem sales tax.
There is a need to take a holistic view of the sector and address concerns of all the stakeholders and all aspects of the civil aviation business.
Though it is difficult to build consensus on certain issues due to differing opinions of various stakeholders, there are many aspects of the business where there is a unanimous demand from the community for action.
A glaring example is the Maintenance, Repair and Overhaul sector. Despite the growing potential of the MRO market, India continues to represent a challenging environment with high taxation, expensive infrastructure, a shortage of skills and strong competition from neighboring markets such as Sri Lanka and the UAE.
Another potential opportunity on the policy front is the current regulation requiring Indian carriers to have completed 5 years of domestic operations and have a fleet size of 20 aircraft before being permitted to launch international services. It appears that this may also require a policy re-look to ensure Indian carriers get a level playing field.
We must also welcome certain positive steps in the recent past, especially the decision to allow foreign airline investment, which has the potential to be game-changing for Indian aviation.
The New Civil Aviation Act, 2012 will soon replace the Aircraft Act of 1934, which does not cover issues such as viability and security, and has been severely criticized in safety audits conducted by global aviation bodies. The new law will provide for a new regulator being created to replace the Directorate General of Civil Aviation (DGCA). The ministry is also in the process of setting-up a new Civil Aviation Authority of India (CAA), which will operate through collective decision-making of a board.
The Civil Aviation Authority of India Bill 2013, recently introduced by Minister of State for Civil Aviation, would provide the CAA full operational and financial autonomy to regulate all issues concerning civil aviation safety and protect the interests of consumers in a fast-changing aviation scenario. With full functional and financial autonomy, the proposed CAA would be able to recruit its own staff, decide on their pay structure and have powers to fix and collect fees for rendering services like safety oversight and surveillance of air navigation services
With regards to Aviation infrastructure, government has announced plans to issue tenders for the construction of 50 low cost airports to improve regional connectivity. This could give boost to the civil aviation sector in India and all related ancillary industries.
A significant recent development is the decision by the government to invite private international operators to bid for operations and management contracts for Chennai and Kolkata airports (and eventually 15 profitable airports over subsequent years), which are currently under the state-owned Airports Authority of India (AAI).
I would also like to touch upon the area of General Aviation which has huge potential, but has been given low priority by successive administrations. Development of heliports is important to support the growth of general aviation in India, especially in areas that cannot have runways for financial or terrain related challenges. The disaster management authorities in Uttarakhand could have utilized such an infrastructure if it was available to evacuate trapped civilians and provide relief to locals in much less time.
There is a need to consider developing a public-private partnership (PPP) policy for development of heliports. There is also a need to develop standardized route operating procedures for helicopters. Non-operational air strips need to be upgraded in places of economic significance such as ports, mining areas, tourist places and industrial clusters. These need to be done at the lowest possible cost without compromising on safety. The air-strip may attract a small number of flights initially and if it has a strong business case, it may ultimately lead to full scale operations in future, with significant benefits to the local economy.
The major concern today is of regulating safety, efficiency and viability in all aspects of aviation. I believe that through a combined effort of the stakeholders we can unlock the huge potential in the Indian Civil Aviation Sector.
Vivek Lall is President and Chief Executive Officer, Reliance Industries Limited and specializes in the defense and aerospace sectors. Previously, he was Vice President and Country Head (India), Boeing Defense Space & Security. Prior to that he was Managing Director of Boeing Commercial Airplanes in India. Before joining Boeing, Vivek was with Raytheon and the NASA Research Center. He holds a Master’s degree in aeronautical engineering and a Ph.D. in aeronautical engineering & modeling. He is a founding Co- Chair of the U.S. – India Aviation Cooperation Program and President of the Mathematical Society of America.