Indian Civil Aviation: Unveiling the Potential

The trials and tribulations of Indian civil aviation stakeholders during the past 12 years or so (since Air Deccan’s arrival on the aviation scene in India) have made them weary and disillusioned. Infrastructure has been inadequate, regulation has been inefficient and monetary policies generally apathetic to the aviation industry as a whole. Reportedly, Amber Dubey avers a profound insight into the reasons thereof, “The biggest challenge that the Indian aviation sector faces is ideological. The Left-leaning approach of policymakers in the past has led to a false perception that providing any support to the aviation industry would be bad politics. It would mean diversion of scarce government resources for the ‘rich’...” Modi’s ascent to power as the Prime Minister last May had brought in a mood of reserved optimism which has turned out to be misplaced inasmuch as no progress has been made towards reform or reorganisation in the civil aviation sector. However, official iterations and catch-phrases are keeping hopes alive that, beyond the visual horizon, a cheering rainbow may be marking time.

Narrow Body vs Wide Body

An inane policy is currently applicable to all Indian airlines. No airline may fly on international routes until it has completed five years of domestic operations and built up a fleet strength of 20 aircraft. Reportedly, speaking at the Gujarat Aero Conclave 2015, the Minister for Civil Aviation, Ashok Gajapathi Raju, said, “I have not seen such rules anywhere in the world. Such rules are pushing back this sector as well as the economy. The Central Government’s job is to promote Indian carriers. Thus, this rule has to go.” However, as of now that is the rule applicable and has been so throughout the life-cycle of all airlines that came up after Air Deccan. The Minister’s statement suggests that the rule is on its way out but unfortunately, it is slated to be replaced by an even more absurd rule related to the accumulation of domestic flying credits (DFCs) for commencing international operations.

The DFC proposal requires a new airline to fly domestic routes to accumulate credits; one DFC represents 10 million air seat kilometres (ASKM), i.e. the number of seats made available by an airline on a domestic route multiplied by the number of kilometres on that route or 10 million revenue passenger seat kilometres (RPSKM), i.e. the number of passengers travelled multiplied by distance travelled in kilometres. The new proposal prescribes the different formulae using ASKMs and RPSKMs in a rather complicated manner differentiating the route categories defined by a scheme called the route dispersal guidelines (RDG) which is itself under revision. An airline would have to accumulate 300 DFCs to be eligible for international operations on long haul routes and 600 DFCs to fly short haul ones.

A new airline commencing with domestic operations would typically go for a narrow body aircraft such as the Airbus A320/ Boeing 737 or a smaller aircraft such as the ATR which Air Pegasus, the latest start up airline in India operates. As a rough calculation, building up to a mandatory minimum of five aircraft in the first year, a start-up airline would take around two years to accumulate 300 DFCs and four years to get 600 DFCs in its kitty depending on the routes it chooses to fly. However, when it has 300 DFCs, it can only fly long haul routes as for short haul routes, it requires 600 DFCs. This aspect of the proposed policy is frustrating for new airlines.

A start-up with 300 DFCs and single-aisle aircraft capable only of short-haul flights up to destinations around four hours away, will now have two options — either wait to accumulate another 300 DFCs to be able to fly short haul, or else buy or lease wide-body aircraft to start long-haul international operations. Both the options are painful for an airline that in its initial years will be intent on attaining profitability for survival. As about two-thirds of the total air capacity in Indian carriers is low-cost, it is unlikely that an airline in its fledgling years would go in for wide-body aircraft in addition to a narrow-body one just because of the DFC rule. Its financials are most likely going to dictate a policy of sticking to one type, the narrow body, even at the expense of a longer waiting period to commence international operations.

Narrow Body Jets

In the narrow-body jet commercial aircraft domain, the most popular with airlines in India is the Airbus A320 followed by the Boeing 737. Airbus is working towards full certification of the improved A320neo while Boeing is moving towards offering the Boeing 737 MAX. Both these models are essentially the original, well proven and highly popular versions but with improved engines, wing designs, more composite content in airframes and flight deck improvements. They are projected by their respective manufacturers as having the potential to affect substantial savings in fuel consumption. The decision to improve existing models instead of designing new ones is clear evidence of the popularity of the two models.

Besides these two, the Embraer E2 family of aircraft and Bombardier’s new CSeries also offer tentative competition. The E2 was launched in Paris Air Show 2013 and has a seating capacity of 88 to 132 passengers depending on the version offered and the CSeries carries 110 or 135 passengers in two versions. Meanwhile, China’s C 919 (168-seater in economy class configuration) and Japan’s MRJ 90 (92 economy class passenger seating) are waiting to make their appearance. The C 919 and the MRJ 90 are facing some difficulties in their certification in the US. Without US certification, their future could be uncertain.

Cargo airlines, for various reasons, have not prospered in India, the only exception being Blue Dart which is doing brisk business essentially connecting the metros. QuikJet is about to relaunch itself as a scheduled cargo carrier with a Boeing 737F; its future is uncertain. ASL Aviation has increased its stake in Quik-Jet to 72.59 per cent from the 50.93 per cent which Farnair, now bought over by ASL Aviation, had. Possibly, the government may go ahead with plans to develop 24 airports as air cargo terminals.

Turboprop Aircraft

Turboprop aircraft are not yet so popular as Tier-II and Tier-III connectivity has not yet come to a level where smaller aircraft would be needed in large numbers. Air Deccan had made successful use of the ATR while the SpiceJet experiment with the Bombardier Q400 has been distasteful due to high maintenance costs. Air Mantra, the only airline to use a smaller turboprop aircraft — the 19-seater Beechcraft 1900 D, also came to grief in a short period of existence.

Conclusion

In November last year, a draft civil aviation policy was released by the Minister of Civil Aviation with a promised finalisation by January 2015. While expectations of some reformative changes from the new Minister for Civil Aviation are as old as the new government, there seems to be no hurry to make those changes. In any case, the draft policy did not address many long-standing and glaring weak areas holding back civil aviation in India. Moreover, a final document is yet to see the light of day despite several deadlines having gone by, the last one being June 15, 2015. Although the document is not expected to bring substantial reform, the inordinate delay in its release highlights the lack of commitment of the establishment. With each passing day, the civil aviation community grows restive on the one hand and hopeful on the other, that the more time it takes to produce the new policy, the more constructive it might turn out to be.

Meanwhile, the new airlines eagerly await the final form of the replacement of the 5/20 rule requiring a domestic airline to fly for five years on domestic routes and to build up its fleet to 20 aircraft before being permitted to fly on international routes, while the older ones who suffered that rule through their initial five years are crying foul over the waiver of the rule.

A government proposal to replace the 5/20 rule with a new DFC rule has been in animated suspension within different ministries of the government and according to reports received up till the time of going to print, the Cabinet is expected to take a call finally on the tenor and texture of the new policy. The best thing for Indian aviation would, of course, be to remove all fetters from airlines and permit them to fly international from day one as long as they can demonstrate their operational readiness to do so safely. After all, the 5/20 rule does not apply to any foreign airline wanting to fly to and within India.

The 51st edition of the Paris Air Show had all major aircraft manufacturers at Le Bourget wooing customers from across the world with new products, solutions and plans. Although aircraft purchase announcements made at air shows by airlines are not spot decisions, there is always eagerness amongst aviation watchers to hear of mega deals and Paris Air Show leads in that realm. In the past there have been many airlines who have announced record deals at air shows, IndiGo and GoAir have done that in past air shows, having ordered 180 and 72 Airbus A320 respectively. This time round the show organisers announced that deals worth $130 billion had been signed.