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Bail-out: Aviation sector gets a life-jacket
In the backdrop of the Centre’s plan to construct 100 airports worth $60 bn, aviation body IATA laments that the sector is bleeding from global uncertainties and policy challenges. But, the Centre may pitch in with relief measures to ease the pain
By
migrator
migrator
New Delhi
India plans to construct 100 new airports with an investment of close to $ 60 billion (about Rs 4.2 lakh crore) in the next 10-15 years, Civil Aviation Minister Suresh Prabhu said Tuesday.
Amid the country’s domestic aviation sector recording double-digit growth for more than three years on the back of rising demand, the government is working on ways to bolster the infrastructure for the sector. “We have plans for 100 new airports to be built in India in the next 10 to 15 years with investments of almost close to USD 60 billion,” the minister said at a conference here. Currently, the Airports Authority of India (AAI) is managing more than 120 aerodromes.
“We plan to put it in the public domain for anyone interested in building infrastructure or airports will get an advanced intimation on where it is going to happen... Our strategy is clear. We have to do it in a PPP mode. We need to have private sector participation,” Prabhu said.
Against the backdrop of the government proposing a new tariff structure for greenfield airports, the International Air Transport Association (IATA) has raised concerns about it. The IATA is a global grouping of more than 280 airlines.
“We believe it makes no sense to fix a per passenger yield at the outset of a concession contract that is set to run for four decades. Flexible parameters should be set that are regularly reviewed by a regulator. As we know from bitter experiences in Brazil, Australia and elsewhere that selecting the company that simply proposes the highest concession fee does not yield good long term results,” IATA Director General and CEO Alexandre de Juniac said. IATA has projected that by 2037, there would be almost 520 million passengers flying to, from and within India each year. “In 2010, 79 million people travelled to/ from/ or within India. By 2017 that doubled to 158 million. That number is expected to triple to 520 mn by 2037,” it noted. The country is also expected to overtake Germany, Japan, Spain and the UK within the next ten years to become the world’s third largest air passenger market.
Loss forecast may lead to bail-out
The Centre said it was working on a relief package for a battered airline industry that an aviation consultancy forecasts will lose up to $1.9 bn this financial year, from rising costs and low fares. Two of the biggest and oldest carriers, Jet Airways and state-owned Air India, are struggling to stem losses in the world’s fastest-growing domestic aviation market, where competition is intense and fuel taxes are high.
But Rajiv Nayan Choubey, the top civil aviation bureaucrat, said that help to cut airline costs was on the way. He did not give details of the measures planned. The Centre plans to offer Air India state-guaranteed borrowing worth Rs 21 bn ($294 mn), along with an equity infusion of 8.6 bn “If we do not support Air India, there may be a value erosion,” Choubey said.
Provide us level-playing field with airlines abroad: SpiceJet CMD
SpiceJet CMD Ajay Singh made a strong pitch to the government to give domestic carriers a “level-playing field” with international carriers who enjoy tax benefits and consequently become able to cushion the impact of high jet fuel prices.
He said domestic carriers needed to raise fares, which was “incredibly” important to remain financially healthy and sustain the growth trajectory in the Indian aviation market.
The Black Box
- India is one of the world’s cheapest domestic airline markets. Deals such as a Rs 3,500 one-way ticket on the flight from Mumbai to Delhi are easy to find
- High fuel taxes, GST on maintenance operations makes domestic work uncompetitive, says consulting firm CAPA India’s report
- Cut-throat competition and high fuel prices weigh on airlines big and small
- Industry loss forecast up to $1.9 bn in the FY ending March 31, up from a Jan estimate of a loss of $430-460 mn, the difference fuelled by a weak rupee, rise in oil prices
- Airlines, including Air India, need an additional $3 bn of capital in near term to shore up balance sheets. In June, the Centre failed to attract bidders for a stake of 76 pc in AI
- Last month, Jet Airways reported a quarterly loss of Rs 13.23 billion, saying it aimed to cut costs, inject capital and monetise its frequent flyer programme
- In July, IndiGo, the country’s largest airline, reported its lowest quarterly profit in three years, with earnings down 97 per cent
- Indian airlines, which have ordered hundreds of new Airbus SE and Boeing Co jets, have struggled to stay profitable despite filling nearly 90 per cent of seats as domestic passengers numbers have more than doubled over the past four years
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