Indian Aviation Ready To Fly?

India is positively shining but has aviation been deprived a place underneath that. Ideal time, it was to gather industry doyens' for the Aviation Round Table at WTI 2004, to front a panel discussion. Bhisham Mansukhani halves his report to underscore the details

World Travel India (WTI) 2004 was not only held in prominence for the number and diversity of its participating exhibitors but the concurrent conferencing that inquired into key issues pressing the travel trade. Following a CEO's Conclave the previous day, February 7 witnessed an important and searching discussion on Indian aviation - its significance to tourism industry and its own grounded predicament.

The Panelist Taking Guard

To ensure the afternoon audience received an informed and well-rounded perspective on Indian civil aviation, Express Travel & Tourism pulled off a coup to rope in six of the most relevant individuals to the industry today. Cyrus Guzder, chairman and MD, AFL was the moderator. Alongside him in the panel were none less than Ashwini Kakkar, CMD, Thomas Cook India, Sunil Kishen, GM - marketing and planning, Indian Airlines, Akbar Al Baker, CEO, Qatar Airways, Saroj K Datta, executive director, Jet Airways, Ashok Fenn, president & CEO, InterGlobe and Prem Subramamium, head - tourism, Infrastructure Development Finance Corporation (IDFC). Members of the travel trade, hosted buyers at WTI and assorted media populated the audience.

Aviation's Serious Plight - Cyrus Guzder

A conspicuous linkage has been established between any given nation's GDP and civil aviation growth for the last 60 years. Since the Second World War, the correlation has in fact been extraordinary and yet in India, though we could cite this correlation in the early years of independence, in the last two decades, this linkage seems to have been broken with GDP far outperforming civil aviation. In fact, in the last five years, the economy has been growing at five per cent and above, while aviation has been stagnant, growing at a percentage point or two.

The fact is that India hasn't always been a laggard in civil aviation. If we cast a look back, up until the 70s, India made remarkable headway. In the 50s and 60s, Air-India was the only global brand that India offered to the world. While in the 70s and 80s, IA was one of the world's largest regional airlines and both had invested heavily in new technology and aircraft. And yet in the last two decades, something seems to have happened perhaps in terms of benign neglect on part of the government that both these airlines to maintain their relative market position. Our airports have faced the same problem due to the failure to invest adequately in infrastructure required to handle the growth of civil aviation.

One wonders how bad things are as we go into this new century. The fact is that the skies over India have brightened in the last 12 months since the arrival of the new civil aviation minister and his early decision to institute the Naresh Chandra Committee's views to arrive at reform proposals for civil aviation.

It's remarkable that within months of the committee having been instituted, the aviation minister has implemented three immediate reforms. He has reduced ATF tax, the cabinet ministry has granted permission to private airlines to operate on one international route. It is however imperative that he looks urgently at the infrastructure and airports and what precisely needs to be done.

An Outsider Looking In - Akbar Al Baker

Open skies are key to developing the aviation industry in the country and so too, the tourism, because airlines are the chief delivery system of the tourism policy of any country especially India which has serious potential unfortunately untapped up till now. The main reason for this is the government's aviation policy and its protectionist attitude towards the national carriers. This consequently restricts employment opportunities, additional growth and infrastructure development in the aviation sector. I would like to give very specific statistics as to why Qatar Airways is so keen on an open sky policy.

In real terms, one can only imagine the exponential growth in the Indian economy, if it were to receive as many tourists as China does. It all roots back to China's liberal aviation policy. Air-India (A-I) benefited by only Rs 250 crore compared to Rs 3,000 crore that went into the kitty foreign carriers on the sale of traffic rights.

There are approximately 30 million Indians staying abroad while only 35 million seats have been allocated through the sale of traffic rights of which 17.5 million are utlitised which leaves a huge gap in supply of seats even for NRIs and expatriates wanting to visit. These traffic rights include countries that do not operate into India while additional seats are not being granted on high-density routes.

Counting The Losses - Ashwini Kakkar

The truth for this country undoubtedly lies in balance. What we have failed to do in the past many years is to provide the right balance. I think that the neglect as a possible reason for the decline of the two flag carriers has been anything but benign. It has been terrible. It's wilful neglect that even extends to airports and closing the demand supply gap is concerned. Now, nobody can challenge basic economics that is, if you don't have supply equal to demand then you are going to create a huge problem for the industry that depends on it. There is such a huge demand-supply gap existing today that the compelled passenger lands up paying Rs 54,000 for an economy class BA seat for instance which is only worth at best in the region of 20,000.

Apart from this, we have failed to create a hub and spoke system in the country, which would have worked wonderfully. Instead, we have got all airlines flying all routes. Coming to airports, how difficult is it to spend Rs 200 to 400 crore on developing the infrastructure of at least one or two important gateways into the country. As far as the issue of open sky is concerned, it's a myth. I don't think any country has a complete open sky policy. Hubs are being created outside India and foreign carriers are benefiting immensely from this due of lack of a lack of a well-directed Indian Civil Aviation Policy. We also need to ensure that as a nation, we invest in the right kind of aircraft. In this context, our flag carriers should have the necessary decision-making authority to make decisions regarding aircraft acquisition.

Driving The Economy - Ashok Fenn

Taking the discussion on air transportation to a more macro plane. The challenge that lies before us is to recognise that air transport is an engine that drives economic development. There has been some discussion about open skies and there are some benefits to be had. In 1995, when the US and Canada signed an open sky agreement, the rise in the number of incremental passengers in the first year alone was one million - a 15 per cent growth over the historical average of three per cent.

The correlation between air transportation and GDP is an established fact. Similarly, if one does a study regarding the GDP per person and the number of trips the person takes, it can be observed that wherever the GDP per person is very high, the number of trips is high as well. This is the case in Britain, US, Japan and Germany, so why should it be any different in the case of India. It is a fact that something needs to be done about the demand- supply gap. We are reliant on the government to solve problems on the supply side.

Of course, on the demand side, as economic development takes place and people have more spending power, there will be an increase. The bottleneck exists on the supply side because of infrastructure pitfalls or regulatory constraints. My belief is that while the government has an influencing role on the supply side, rapid economic development can force the hand of the government to initiate reform on the supply end.

Domestic Tourism Needs To Grow -Saroj K Dutta

Two questions critical in today's age is why has domestic aviation in this country not grown despite the visible increase in the urge to travel and why domestic fares have overtaken existing inflation levels. Well, it would surprise some to know that domestic airfares devoid of government surcharge remain below existing inflation levels. ATF costs, landing and parking charges are the most expensive in the country. Domestic aviation in this country is not altogether viable. The yield per customer in India is the lowest in the world. Thirty five per cent of the ticket component represents the ATF. Landing and aviation charges are 85 per cent higher than the benchmark. The pay rolls on the other hand are very low. In the same breath, we need to revisit premises on which tourist numbers are arrived at. Eighty per cent of Jet Airways' traffic comprises the business traveller. In order for domestic aviation to grow, domestic tourism that can afford air travel needs to grow like the Indian outbound market has.

Every frequency, if it is to be sustained, has to be a viable one. In the last ten years, we have grown from ten airports to 41 today so there is no question about whether we are interested in providing greater connectivity or not. It's always been a chicken and egg story as to whether the markets develop only if one initiates an air service or vice verse but there needs to be a minimum limited potential before we can introduce a frequency. We have opened stations in areas that were not served earlier and in the case of Hubli, we have conducted several studies over the years but have been unable to justify resuming operations to Hubli even with an ATR Turboprop aircraft.

Have A Long term Plan -Prem Subramanium

There is desperate need to improve the airports. The government has to look at how much time it takes to land an aircraft in any given weather condition and how much time does it take for a passenger to get out of the airport. Substantial funds have to be allocated to implementing changes. Initially, there may be a gap between the funds invested and revenue generated but going forward, these investments will pay rich dividend. There were some statements made in the press about having golf courses at the airports and other such luxuries. Well, what the airports really need is serious financial restructuring and a debate into why profits generated by some of the airports are not being reinvested into their development. The reality is that if a flight cannot land in Delhi, it does not land in Mumbai either for the simple fact that there is no hotel rooms available and so it goes to Thailand instead. Then what is the point of opening up the skies if there isn't the lodging infrastructure to absorb the incoming. We need a five to seven year plan that addresses inventories at every level.

Open Skies Or Otherwise - Sunil Kishen

Within the ambit of the current policy of the Government of India, which is supposedly not an open sky policy, there has been an entitlement of over 47,000 seats per week to foreign carriers between 2000 and 2003. The estimated rate of growth of this entitlement has been 31 per cent. In the entitlement, the 47,000 seats per week have been used by foreign carriers coming to India each direction, which amounts to 41000 in total.

The average rate of growth of these entitlements has been 58 per cent in the last three years, whereas the growth in international traffic has been 4.3 per cent per annum.

The second point that I would like to make in this regard is the number of points of call that have been added in India in terms of air accessibility, in addition to the four major gateways that we used to have. Now we have additional points of call in practically every southern state of India including Kochi, Calicut, Hyderabad, Bangalore, Guwahati, Varanasi. Primarily, the foreign carriers have been benefited by this.

Thirdly, tourist arrivals include visitors coming to India to visit their families. Now, these arrivals have no multiplier effect on economy. There is no benefit accruing from such arrival and departures. Therefore the gap between the demand and supply as rightly pointed is peculiar to any country during a particular peak season. In fact, during the Christmas, travelling to Europe and South Atlantic is a much more difficult proposition than travelling to anywhere else in the world. Also, the lack of seat capacity can alone be blamed for low inbound tourist numbers. The tourism product needs to viewed as a whole i.e. in its entire context, and not by just merely getting the tourists into the country. The job isn't done until the tourism product is competitive enough in order to meet the tough challenge from a competitive economy like China. Therefore, there are a few important matters that need to be examined before we reach to a conclusion in terms of "open-skies or otherwise".