Indian civil aviation needs $30 billion ( Rs. 1,35,000 crore) investment, said Civil Aviation Secretary Dr Nasim Zaidi at the “Centenary Conference of Indian Civil Aviation,” organised by ASSOCHAM and MoCA
The exponential growth of the Indian civil aviation sector needs investments worth over $30 billion ( Rs. 1,35,000 crore) in the next 15 years and the Ministry of Civil Aviation (MoCA) has worked out a roadmap to facilitate this, announced the Secretary of Civil Aviation, Dr Nasim Zaidi.
Inaugurating the “Centenary Conference of Indian Civil Aviation,” organised by the Associated Chambers of Commerce and Industry (ASSOCHAM) and the Ministry of Civil Aviation, Dr Zaidi outlined three key initiatives taken up by the Ministry during the year— creation of a national registry of airports; formation of a civil aviation authority; independent investigation board among other developmental initiatives.
The passenger growth has been phenomenal at 23 per cent in 2010-11, up from 19 per cent the previous period. Only two per cent and 0.5 per cent Indians fly domestic and international, respectively. Though we are way behind, there is huge potential. The growth of the sector is critically dependent on infrastructure, safety, liberalisation, human resources and environment.
The Director General of Association of Asia Pacific Airlines (AAPA), Andrew Herdman, said while the Asia-Pacific region was doing well commercially in the aviation sector, on the regulatory front, the dominance of the US and Europe continued. Aviation as a business faces significant regulatory constraints and there was need to revisit the issues for global standardisation.
The outlook for the sector was quite dampening as crude oil prices were over $120 ( Rs. 5,400) a barrel. Oil price volatility impacts the aviation sector, more so in India due to the high taxation regime.
Airline Perspective
The conference deliberated on three issues—“Airports: Constraints and Growth Drivers”; “Airlines Industry: Challenges and Opportunities”; and “Training and Capacity Building”, with a host of experts giving their perspectives.
The refrain of the top airline executives was on the perception of those in the bureaucracy and also the people at large that the airline business was a highly profitable one. Top airline honchos—Saroj K. Datta, Executive Director of Jet Airways; Aditya Ghosh, President, IndiGo; Sanjay Aggarwal, CEO of Kingfisher Airlines; Kaushik Khona, CEO, GoAir; Tom Wright, General Manager (India), Cathay Pacific Airways and Captain Pankaj Chopra, Vice President (Flight Safety), Religare Voyages, were on the same page on “how everyone associated with the aviation industry makes money, except the airlines”. The profit-margins are wafer-thin.
Under-Serviced Market
India being a highly under-serviced market, they were optimistic about the opportunities, but the challenges were many—infrastructural issues; high taxation; undue regulation; human resource requirements, etc.
The joke that Emirates is India’s national carrier is a matter of concern, but which Indian airline has the balance sheet to compete with them, questioned Sanjay Aggarwal. “Weaker balance sheets are a result of punitive tax structure; higher fuel prices; exorbitant airport charges,” he said and hoped that there would be a rational cost structure. Further endorsing this, Aditya Ghosh sought ‘unshackling’ of the regulatory industry and an active programme for Indian airlines to take a bigger share of the global market.
Kaushik Khona said an auto rickshaw driver charged Rs. 6.50 per km, while it was Rs. 4 per km for airlines and yet it was perceived that airlines overcharged customers. There was need to revisit foreign direct investment (FDI) so as to allow access to funds. Taxation, he lamented, had crippled the industry and it was a ‘crime to make profits’. “If by mistake an airline made profit, then it has to pay minimum alternate tax (MAT),” he jocularly remarked.
With regard to the general aviation sector, Captain Pankaj Chopra said that in the metros the airspace was getting congested and called for development of satellite airports. Also there was need to set up a joint regulatory committee for non-scheduled and general aviation operators.
Embraer’s Regional Sales Director, Chuck Pulakhandam forecast that secondary markets would overtake primary markets by 2012, requiring the ‘right size’ aircraft. Giving a perspective on seat configuration and business prospects, Chuck Pulakhandam pointed out that in the 250-seat category, there were mixed operators accounting for 27 per cent business; between 50 and 250 (mostly aircraft with 70 to 120-seat configurations) the percentage was 51; and between 20- and 50-seat, the percentage was 22 per cent. The 70-120-seat aircraft market, he added, was growing, and that Embraer was perfectly positioned to offer airlines the ‘right’ aircraft for the ‘right’ destination.
