The Economic Survey 2011-12 appeared to be favourably inclined to grant permission to foreign airlines to invest in domestic airlines.
“The FDI policy currently does not permit foreign airlines' investments that denies them access to potential sources of capital and expertise,” said the Survey.
Hails ATF import
The Survey lauded the government's decision to allow airlines to import aviation turbine fuel (ATF) directly, as “it will improve operational economies.”
However, it said that in the long run, “airlines will need to improve their internal accruals, access to domestic and international capital, and their overall operations to remain vibrant and viable. Air carriers have been affected by high ATF prices because of high incidence of taxes. The recent decision to allow them import of ATF will hopefully improve their operational economies.”
Major challenges
Listing the major challenges for the sector, which is facing turbulent times, the Survey said airlines were bogged down by high and growing debt burden.
“The airline industry in India suffers from huge debt burden — close to $20 billion (estimated for 2011-12). Half of this debt is aircraft related and the rest is for working capital loans payments to airport operators and fuel expenses.”
Even though air traffic was growing, averaging 18.5 per cent in the last seven years, the financial performance of airlines had not kept in sync, and it necessitated more injection of money into the sector, it noted.
Continuous investment
“High growth rates for the past few years in aviation, particularly in the passenger segment, are not getting reflected in the financial health of the carriers. To manage the next growth phase safely and efficiently, significant and continuous investment will be required,” it said.
The domestic passenger traffic handled at Indian airports grew by 19.4 per cent during January-November, 2011 touching 108.1 million. Further, international passenger traffic and at Indian airports grew by 7.7 per cent during January-November 2011.
Green-field airports
It said the government gave “in-principle” approval for setting up green-field airports at Karaikal in Puducherry and Shirdi in Maharashtra. The upgrading of the Kolkata and Chennai airports, including construction of new terminals, were at advanced stages of completion.
“In another 18 non-metro airports, various upgrading works like expansion of terminal buildings, aprons, taxiways, and aerobridges have been taken up. For improving air navigation services, the Airports Authority of India has installed the new ATS automation system at Chennai,” the Survey pointed out.
