By Saraswathi Muniappan
NEW DELHI (NNN-Bernama) -- India’s aviation sector is becoming worse by the day with mounting debts, widening losses, pilot strike, the shutting down of
overseas operations and no sign of a solid recovery plan in sight for now.
Of the six major operators, five are in red with the exception of Indigo, a o-frills airline.
India's Aviation Minister, Ajit Singh, announced recently that the industry is expected to post a combined loss of nearly US$2 billion for the year ended March 31, 2012.
Since 2004, the industry’s accumulated losses amounted to a staggering S$8 billion.
Privately owned, Kingfisher, which has shut down its overseas operation, is one of those heavily in debt and in dire need of funds.
Air India, the state-owned carrier, is equally struggling and owes its employees Rs124 crores (US$23.5 million) in unpaid salaries.
The others are Jet Airways, SpiceJet and GoAir.
Against the backdrop of the current turmoil in the industry, it was also reported that some had spent a fortune becoming pilots and saddled with debt due to loans, were now working in call centres.
The government’s recent move to allow Air India to raise money through bonds and allow foreign investment of up to 49 per cent in the industry, seems to be just a temporary salvation plan.
Talks are in progress to allow foreign airlines to take up the 49 per cent
but even that seems to be unlikely in the near future or an absolute solution.
"Allowing foreign airlines to invest in Indian aviation is not a panacea without addressing the costs, taxes and infrastructure issues. It may only be a theoretical exercise," the International Air Transport Association's (IATA) director-general, Tony Tyler said.
He said India needs capacity expansion and cited the delay in Mumbai airport, where the first phase was to be opened in 2014, but construction has not even begun.
The IATA had also lamented the 345 per cent increase in airport charges at Delhi airport, making it the world’s most expensive.
"India’s aviation industry is already sick. The increase will put it in intensive care from a cost perspective," it said.
It also said the government needs to better coordinate its policies on aviation.
"While on the one hand the government is trying to help the airlines, the increase in charges at the Delhi airport will set back significantly whatever assistance the government is trying to provide," the IATA added.
"Under current conditions, the odds are stacked against any investor making
a positive return on investment in the Indian aviation sector. And no one is likely to come forward unless they see themselves making a profit," said Tyler.
But troubled as it may be, the industry is not something that can be overlooked.
Aviation is responsible for 0.5 per cent of India’s gross domestic product (GDP) and supports 1.7 million jobs. On an average, people in India make 0.1trips per year, or one trip by air every 10 years, compared to 1.8 times per year in the United States.
"Aviation’s contribution to the India economy could be much more. If India’s 1.17 billion people traveled at the same frequency as in the US, a market of 2.1 billion travelers would be created.
"Even one-third of that would be an air travel market of about 700 million, rivaling that of the US," said Tyler, who is also the IATA chief executive officer.
Aircraft manufacturer, Boeing, in its outlook on India said that despite recent challenges for the economy in general, and the aviation sector in particular, the fundamental long-term story for Indian aviation is one of robust growth.
Real GDP growth, which is the foundation to the growth of air travel, is expected to remain around eight per cent per year through 2014, with slower growth in 2012, followed by some acceleration in later years, according to HIS Global Insight.
With half of India’s population under the age of 25, there will be an abundant supply of new customers for airlines to tap over the next 20 years, said Boeing.
The World Travel & Tourism Council projects that by 2021 the total contribution of travel and tourism will account for approximately five per cent of India’s total GDP, which is about US$220 billion in economic value.
Travel and tourism's total contribution will also account for 8.1 per cent of total employment in India by 2021, representing 47 million jobs.
International visitor arrivals are expected to nearly double to between 2011-2021, reaching over 11 million in the later years.
Hence, to unleash the potential and fully benefit from the industry, what India really needs is a common vision for aviation with a strong implementation plan.
"India should not settle for a bronze medal in the world of aviation. It has pure gold potential," said Tyler. -- NNN-BERNAMA
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