Aviation sector confident of weathering current storm

Unfazed by the controversy surrounding the financial crisis at Air India, aviation observers say that the long-term prognosis for the civil aviation industry is good in view of the reforms carried out over the last five years.

In his previous stint as minister of civil aviation, Praful Patel opened up the skies to competition and also took the bold step of creating a public-private partnership (PPP) to upgrade and modernise the airport infrastructure in the country. The Delhi and Mumbai airports are being upgraded to world class airports with private sector participation; the airports at Chennai and Kolkata are in the process of being upgraded and work has also begun on 35 non-metro and smaller airports across the country for similar upgradation.

The minister has allowed 100% foreign direct investment for setting up greenfield airports. These changes, says one aviation industry expert, are “irreversible and will change the face of aviation in the medium term”.

While there has been much hand-wringing about the losses suffered by Indian carriers, both public and private, the big success has been on fleet expansion. From just 100 aircraft in 2004, the combined fleet strength of Indian carriers has almost quadrupled.

Patel, according to aviation sources, is working towards further liberalisation even in his second term. Take, for example, the proposal to allow foreign airlines to pick up equity in Indian carriers. Though many of his own cabinet colleagues are opposed to the idea, Patel has been instrumental in nudging the government to consider the contentious proposal, which is now lying with the commerce ministry. If approved, this move may help some of the cash-strapped Indian carriers raise finances for survival.

The recent move to ease norms for Indian carriers to fly abroad is expected to help both, large and small, Indian airlines. Patel is believed to favour a reduction in the current five-year mandatory domestic flying experience airline to three. If okayed, domestic airlines will be allowed fly abroad after plying domestic routes for three years.
The ministry is also encouraging functions such as cargo carriage within and outside India, and the setting up of engineering and airframe repair centres.

Meanwhile, the ministry has been lobbying for tax sops. When the prices of aviation fuel hit the roof last year, Patel succeeded in getting the oil marketing companies to extend longer credit to airline companies, giving them breathing space. The ministry is now lobbying for a waiver of sales tax on aviation fuel with different states in a bid to
lower prices.