Few years ago, India's airline industry was flying high. India, one of the fastest growing and most competitive aviation markets in the world. Six new carriers launched. In the last four years, Indian carriers ordered 400 Boeing and Airbus jetliners worth about $37 billion.
But is the fairy tale for Indian airline industry over or is it that there is only one story around the corner – mayhem? The impact of the economic recession is clearly visible, as Indian aviation industry posted a whopping loss of $2 billion in FY’09. This mayhem is not peculiar to only Indian airline industry but has hit global players viz. British Airways, Air-France KLM, Lufthansa, to name a few.
Players are forced to postpone their international expansion plans. The domestic capacity is on a decline. Do you think that resorting to steps like turning their full service domestic fleets into budget businesses, deferring aircraft deliveries, cancelling orders, rationalizing routes and trimming staff would work as balm to their sufferings?
Now what are these players shouting for? Bailout! Players like British Airways have already got the support from the governement while Indian players are still waiting for a bailout in the form of reduction in taxes and airport charges, allowing them to import jet fuels under the open general license which would save them on high sales tax, as also proposed by Naresh Chandra Committee and adding ATF under declared goods category, which the airlines say will result in an estimated annual savings of $624 million for the industry. According to an estimate, the ATF prices in India are 60-70% higher than those at the international level, and fuel costs accounts for about 40% of the total operating costs vis-à-vis 10-15% in other countries, add to their woes.
As part of measures to provide relief to the airlines, the government has already brought down customs duty from 5 to 2.5%. Is that sufficient enough?
But critics’ claim that still after 4-5 years only 2% of the population travels by air and the airline industry did very less or nothing to attract the 98% that uses road and rail travel. Even the allegation was raised that the airline operators formed cartel and fixed the price of airline tickets, which is a crime in any other country. But was this practised in any India for the lack of transparency or is it because we lack structural aviation policy? But it is projected that cargo traffic, airline traffic, number of passengers or even the number of airplans, each of these will record a growth rate between 3% and 5.5% over the next 20 years.
But how relevant do you think these future prediction holds good keeping into consideration their bleeding status? And do we need a bailout package or an aviation policy?
Share your viewpoint or send us your feedback at splconquest@gmail.com
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