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21 Sep, 2012

Once High-Flying Indian Aviation Sector Still in a Rut


Ministry of Civil Aviation, 21-September, 2012 – Union Minister of Civil Aviation Mr Ajit Singh has said that providing affordable air connectivity to remote and interior areas of the country, the North Eastern Region and Tier-II & III cities of India is high on his priorities. For this new and innovative solution in the form of Route Dispersal Guidelines, aircraft acquisition and development of low cost airports will be put in place. He was addressing the 5th ASSOCHAM International Conference on Indian Civil Aviation in New Delhi today.

The Minister outlined a number of important action points needed to develop civil aviation sector in India. The agenda that he narrated in the Conference to develop the sector included getting ATF declared as notified product to bring transparency in its pricing and reduction of VAT on ATF by the States; creation of Civil Aviation Authority to manage the phenomenal growth of air traffic with safety; development of world class ANS infrastructure to manage the coming growth phase safely and efficiently; development of low cost airports to keep the tariff at its minimal at smaller airports which in turn would help in making air travel affordable; restructuring of Airports Authority of India into ANS & Civil Wing to make it more effective, efficient and professional body; creation of a separate Civil Aviation Security Force which is professionally trained and exclusively meant for the work of civil aviation and skill augmentation in civil aviation sector through a vibrant, world class aviation education and training.

Mr Singh expressed concern over the financial health of airline carriers in India despite the high growth rate of passengers. Stating that the approximate losses of airlines in the last financial year 2011-12 have been over Rs. 10,000 crores, the Minister said that one of the major challenges of the air traffic industry in India is the high and growing debt burden of the carriers. He said nearly half of the debt is aircraft related and the rest is accounted for by working capital loans, dues to airport operators and fuel companies. Mr Singh said that while there are number of structural factors that are responsible for this phenomenon, the operating cost environment is adversely impacting the financials of the airline sector.

Mr Singh emphasised the need to develop India as an international hub for the passengers. He said that action in this regard has been initiated, which includes revisiting the policy regarding bilateral air service agreements with different countries and also rationalisation of all bilaterals and traffic entitlements on international routes to Indian carriers and rationalisation of traffic on domestic routes. The Minister outlined the major actions taken in the last nine months in this direction which included allowing 49% FDI by foreign airlines in Indian carriers, allowing Indian carriers to import ATF, allocation of traffic rights to domestic private carriers to fly on International routes and creation of separate Air Accident Bureau for effective analysis of causes and taking corrective measures. Mr Singh also touched upon the steps taken to bring turnaround of Air India including equity infusion, conversion of short term loans to long term loans and issue of Government guaranteed NCDs to raise funds.

The Minister said India needs to make lot of efforts and significant investments in the field of development of airport infrastructure (construction of new airports, expansion and modernization of existing airports), improvement in connecting infrastructure (road, metro, sea, link etc.) and better air space management. He called upon the industry to come forward with innovative & implementable ideas for the development of civil aviation sector in India.