Three Years Of Modi Govt: Flight Plan

The unveiling of the National Civil Aviation Policy (NCAP 2016) is probably the most historic step undertaken by the Modi government. Why?Because for the first time in the history of independent India, there has been a comprehensive policy document that covers 22 different aspects of civil aviation. But the key takeaways of NCAP 2016 are ‘affordability’ and ‘connectivity’. “Thanks to low crude oil prices, growing economy and a supportive policy regime, Indian aviation is currently in a sweet spot,” says Amber Dubey, Partner and Head (Aerospace and Defence), KPMG India. “It gives India an opportunity to leapfrog and take aviation to the masses, especially leveraging the Udan scheme for regional air connectivity,” he says.

It is pertinent to capture the civil aviation growth story from the point of view of a new airline that launched in the past two years. Phee Teik Yeoh, CEO of Vistara, recounts the success the airline has tasted ever since it launched in 2015. In a short span, Vistara has grown to expand its network across the country, connecting 19 destinations with a fleet of 13 aircraft, flying 45 routes and over 550 flights a week. Yeoh says Vistara has flown close to 5 million customers in the past 24 months. “The government recognised some significant challenges that the industry has been grappling with over years, and the NCAP genuinely attempts to address them,” says Yeoh. India now has a progressive, pro-business and pro-consumer policy, he adds.

On the construction of greenfield and brownfield airports, there is a visible momentum. Greenfield airports at Navi Mumbai and Mopa in Goa have been awarded to developers. Several others like Bhogapuram near Visakhapatnam are about to be bid out. AAI’s Jaipur and Ahmedabad airports are likely to be handed over to private operators for management, informs Dubey. “The NCAP 2016 stipulated the hybrid till system of airport tariff calculation. This is likely to lead to more global airports operators entering India through primary or secondary transactions,” he adds.

The performance of national carrier Air India continues to be a work-in-progress. While lower fuel prices, debt payoff, route rationalisation and the performance of strategic business units have definitely helped Air India financially, the structural challenges and endemic problems continue to plague the carrier, experts feel.

A few aviation industry observers agree that Air India has excellent leadership and staff but being a public sector entity restricts their freedom to take commercial decisions on the go. “Air India has to be privatised sooner or later — the question is ‘when’ than ‘if’,” says Dubey. With competition in the sector getting more intense every passing year, the more we delay the lesser value the government would get when it eventually bites the bullet, he says.

In order to support the existing airlines, the government has significantly improved the ease of doing business. Competition is being encouraged by allowing foreign airlines to compete in India. Airlines are able to import aircraft seamlessly and get their air-worthiness certificates faster these days. There are monthly roundtables at the civil aviation ministry with all airline and the airport CEOs to help address issues in a collaborative manner.

Unfinished Work
The passenger throughput in FY 2016-17 was 264 million, which is tantalisingly close to the 270 million projected for FY 2016-17 as part of the 12th Five Year Plan (2012-17).

Somehow, the policy makers have not taken up airports capacity expansion very seriously. With leading destination airports’ like Mumbai, Delhi, Goa and Pune among others getting constrained, the impact will be felt across the national air grid. Four large private airports (Delhi, Mumbai, Hyderabad and Bengaluru) contributed about 58 per cent to the air traffic in FY16, gradually increasing from 56.3 per cent recorded in FY13.

KPMG India feels that the scorching pace of over 20 per cent annual growth in domestic traffic may slow down to around 12-14 per cent. The next big wave is likely to come around 2021 when greenfield airports get commissioned and existing airports complete their expansion programmes. Abhaya Agarwal, partner , infrastructure &andPPP at EY, agrees. “There is an urgent requirement for more PPP-based airport expansion/modernisation projects. Budget 2017 announced brownfield PPP airports. But so far, the results are not very visible,” says Agarwal.

Then, there are challenges related to infrastructure deficit, safety, security, staff skills and low use of digital technologies and biometrics. Air cargo, aircraft maintenance and air navigation too need further reforms and support, experts feel.

The National Aviation University (NAU) needs to be fast-tracked. If these are addressed with a sense of urgency, India could get closer to its dream of becoming the top aviation market by 2030. “With NCAP 2016 in place, the focus shifts to its execution,” says Dubey.