Indian aviation needs a strong and steady tailwind
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Policymakers ought to recognise the country’s untapped potential and work towards dismantling the many hurdles

July 06, 2022 12:16 am | Updated 12:26 pm IST

‘Aviation is integral to equitable economic growth’

‘Aviation is integral to equitable economic growth’ | Photo Credit: M.A. SRIRAM

Around four decades ago, India had two television channels — Doordarshan One and Doordarshan Two. A programming highlight was a popular R.K. Laxman cartoon. On channel one, there was programming on Indira Gandhi and when a viewer got bored, he switched to the other channel, which had programming on Sanjay Gandhi, her second son and a politician who mattered then. There were only two car companies, manufacturing the Ambassador and the Fiat Premier Padmini; two motorcycle and two scooter companies, that made the Enfield India and Ideal Jawa bikes, and the Bajaj and Lambretta scooters, respectively; one telephone company, two airlines, Air India and Indian Airlines, and a bunch of crumbling public sector airports.

Then came some change. Thanks to the far-sighted reforms ushered in by P.V. Narasimha Rao, who was ably assisted by Manmohan Singh, and carried forward during the Rajiv Gandhi and Atal Bihari Vajpayee eras and also subsequent governments, India now has over 500 television channels, more than 20 automobile and 15 two-wheeler manufacturers, a revolution and proliferation in the cellphone sector (but now in danger of becoming a duopoly), and a plethora of pharmaceutical companies. The country is a pioneer and world leader in vaccine production and a mighty nation in software and financial services, which are the envy of the rest of the world for innovation and being low cost. But there is also a twist to this tale. There are a number of airline companies, but they are struggling.

The reforms that opened up the aviation sector in 1991 and ended the licence raj and the monopoly of Indian Airlines and Air India changed the sector. A slew of private sector airlines were given the licence to fly, but two, Jet Airways and Sahara, survived, resulting in cartelisation. There was change again when the concept of low cost airlines in India took shape in 2003 which overcame the cost barrier. There was an explosion in demand and the common man could think of flying. Along with this came a liberalisation of various other sectors that propelled India to the front; it was a vibrant and an emerging economic power and a leader among developing economies.

Barriers and some data

Sadly, while all other sectors have grown by leaps and bounds, Indian aviation has become ‘the sick man of India’. The growth of aviation has been affected by choking regulations, tough entry barriers for new entrants, high fuel prices on account of sky high taxes, and inefficient public sector airports that are paving the way for monopoly airports that are extortionist in the absence of robust competition. Frequent and knee-jerk changes only point to the absence of a long-term visionary strategic policy not just for airlines but also for the entire gamut of sectors in aviation.

The number of Indians who buy air tickets in a year is 140 million (the figure for 2019) before COVID-19 struck and ravaged the economy. They are not 140 million different individuals as it seems. That number comprises 35 million to 40 million frequent flyers who form the bulk of ticket buyers. It translates to less than 4% of the population who can afford air travel, placing India just alongside some poorer African countries, in terms of the per capita consumption of air tickets. Brazil, Malaysia, Indonesia and China are way ahead of India.

Hard numbers across the world for the pre-COVID-19 year 2019 provide context to the story. Ireland, not the biggest of economies, had 28 million domestic air passengers or tickets sold against a population of five million. In Europe, it was 1,146 million passengers for a population of 447 million; in the United States, it was 927 million passengers for a population of 325 million. Let us leave the most developed economies. Here is more data: Brazil 119 million passengers/population 215 million; Malaysia 63 million passengers/population approximately 33 million; Indonesia 116 million passengers/population nearly 280 million, and China, 660 million passengers/1.4 billion people. In contrast, India, with 1.25 billion people, had 140 million domestic passengers. And, finally, some more numbers: Ethiopia five million passengers/population nearly 120 million and Egypt, 13.2 million passengers/ population 100 million.

A Eureka moment

I founded a helicopter company in 1995, but in 2002 I envisioned a new vibrant India that had unleashed consumer aspirations in its citizens in the wake of a flood of reforms in the economy in China. The explosion of television channels that spurred consumer demand through advertisement unshackled the entrepreneurial ‘animal spirits’ that had been long dormant in India.

Let me give you an example. In 2002, while transiting at Luton airport (one of the six major international airports serving the London Metropolitan area) on my way to the United States for an aviation conference, I saw an advertisement that hit me like lightning — 13 million passengers per annum flew through this tiny airport. To make this more relatable, that was the number of passengers who passed through nearly 40 airports in India that were operational then. Later, on a domestic flight in Phoenix in Midwest U.S., the passenger in the seat next to me was a heavily tattooed burly man in shorts and bunions who was travelling with his family. As we chatted, I learnt that he was a carpenter visiting the Grand Canyon. It was a journey that was my Eureka moment. I decided that India was ready for a revolution and launched a low cost airline on a wing and a prayer, and invested with hope and optimism — the invisible fuel of any economy.

It was a crazy idea but the environment seemed conducive under the National Democratic Alliance government led by Atal Bihari Vajpayee. Entrepreneurs break the status quo, smash cartels and create new markets. There are the examples of Bill Gates, Steve Jobs and even India’s N.R. Narayana Murthy who founded Infosys (with other professionals) with an initial capital investment of ₹10,000. Today, one has the newer examples of Byju or PayTm. Naresh Goyal was a humble travel agent who put together some funds and built a world class airline, Jet Airways. Capital will eventually find entrepreneurs who have revolutionary ideas just as river coursing through land finds the sea. As we have seen many times, a mighty war chest need not guarantee the success of a game-changing venture.

The ‘Start-up India’ initiative is a laudable initiative by the government of the day and the Prime Minister, Narendra Modi. It is by and large the driving force in hi-tech companies and disrupting many conventional businesses. But the point is that this force must spread to other areas. Aviation is integral to equitable economic growth, for a country to be globally competitive and to change the situation in swathes of India that are struggling with poverty and unemployment. Passenger airlines and air cargo overcome geography and connect remote areas are alienated from the mainstream. They can drive investment deep into the country, giving people access to markets. More importantly, they boost tourism, which is the largest employment generator in the unorganised sector.

With mega airports controlling air and ground space, it is almost impossible to connect rural and small towns from the large metros. Despite the regional airport development plan, ‘Ude Desh ka Aam Naagrik ( UDAN) initiative, there is not much regional connectivity. And where slots are made available with difficulty, there is the barrier of prohibitive costs.

Carry out these reforms

India’s air cargo growth is also languishing. Hong Kong airport alone handles more cargo than all of India’s over 100 airports put together. Air cargo integrated with road, rail and port infrastructure is the backbone of a growing economy. It is critical to understand that for passenger airlines to grow, there have to be reforms in all areas of aviation, i.e., air cargo, airports, aviation fuel taxes (State and central, which in India are among the highest in the world) and Maintenance, Repair and Overhaul (MRO). They are in a dismal state in India. For example, there are labyrinthine taxes, customs, other duties and tortuous rules to be overcome to bring in parts, to facilitate repair and overhaul, and to re-export them or for use in aircraft here. This is a huge deterrent. Airlines find it easier to send their aircraft to major MROs abroad (Dubai, Singapore or Germany), some of which employ Indian technicians. Similarly, the charter business has remained stagnant. It is ironic that when there are thousands of pilots and technicians unemployed in India, airlines have to look for foreign pilots and engineers, pushing up costs in the process.

Trough and crest

And, finally, there is India’s Aircraft Act, 1934 and Aircraft Rules, 1937. Though there are frequent modifications under the above overarching mother Act and Rules, India has not kept pace with modern technology in aerospace, increasing costs to the industry and ultimately affecting passenger growth. Regulators are not popular in any country. India’s statutory regulatory authority, the Directorate General of Civil Aviation, needs to be modernised, well-staffed, motivated and incentivised. There need to be aviation professionals in charge rather than the ubiquitous bureaucrat from the Indian Administrative Service There needs to be a comprehensive overhaul and deep reforms.

But despite the setbacks and deterrents, there is a silver lining. India may not possess all. But it has an inexhaustible market and largely untapped potential. That is what gives many of us hope. Policymakers need to be asked only one question: What should the Government do to make the common Indian fly high? How does one increase the figure of 4% who fly now to 50% in the next two decades?

The answer will guide the aviation road map we aspire for.

Captain G.R. Gopinath (retired) is a farmer and entrepreneur, the founder of Air Deccan

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