Global aviation honchos to Modi government: Give reforms wings

MUMBAI: Feelings are mixed for global aviation honchos on the Narendra Modi government’s two years in office. They welcome initiatives such as to increase regional connectivity, but want more proactive steps that will help unleash the full potential of the sector.

The government needs to do more in terms of cutting bureaucratic hurdles, fast-tracking policy initiatives, simplifying rules and improving airport infrastructure than it is doing now, several of them said.

ET interviewed more than 10 top aviation executives at the recent annual general meeting of the International Air Transport Association held in the Irish capital of Dublin. The comments come at a time when the policy regime in India is set to change. The government is expected to announce a new civil aviation policy on Wednesday, and at least some of the concerns raised by the executives are likely to be addressed in it.

“A lot is still to be done because India is a country with 1.25 billion people and when you compare the traffic and the number of aeroplanes in China, there is so much potential for more growth,” said Akbar Al Baker, group chief executive at Qatar Airways. “Unfortunately, bureaucrats don’t see the importance of making decisions which are in the interest of the country,” he added.

The industry is still facing “infrastructure, taxation and cost issues” in India, said Willie Walsh, CEO of International Airlines Group, a Spanish-British multinational airline holding group that includes British Airways. He acknowledged, however, that there has been progress.

China’s airlines flew 425.6 million passengers in 2015. In India, that number was less than a fifth at 81.09 million. But, Indian aviation is a growth story, especially on the domestic side. India’s air passenger traffic grew more than 20% in 2015, among that fastest in the world and quicker than most other sectors within the country. In April, domestic traffic soared almost 22%, marking it the 20th month of double-digit growth, according to IATA. That also outpaced China’s 9.5% expansion and US’ 2.4%. In Europe, traffic grew 1.9% in April, while in Brazil, it shrank 12.1%.

The industry wants steps that would support the growth, that too without any further delay.

The government unveiled a draft of the civil aviation policy in last October, but disagreements within the civil aviation ministry and outside over certain proposals, as well as hectic lobbying from the industry have led to delays in its finalization. The main point of contention was a rule that mandates local carriers to fly five years and scale their fleet up to 20 planes to be allowed to fly international. The government has now proposed to allow even new airlines to fly overseas, provided they have at least 20 aircraft or 20% of the capacity is utilised on domestic routes, whichever is more. Other proposals of levying a 2% cess to promote regional connectivity or auctioning of unused bilateral traffic rights have either been changed or referred to other government panels for discussion.

“There is a lot about the policy we don’t like so far,” said Tony Tyler, the outgoing director-general of the IATA. “Our biggest concern is the regional connectivity fees. It’s just going to increase the cost of air travel, it will dampen demand. It’s against International Civil Aviation Organisation principles.”

He is also opposed to the proposal to auction bilateral traffic rights, which allow foreign airlines to fly to India.

“We don’t like the idea of auctioning unused bilateral traffic rights which is something that doesn’t happen anywhere in the world. It undermines the very principles on the basis of which bilateral rights are exchanged. If you want to change the system, fine change it, but don’t start looking just to make money out of it,” Tyler said.

International airlines have also been demanding higher air traffic rights, something the government is cautious in granting given Indian carriers with limited size and fleet manage to utilise only a certain percentage.

A case in point is Dubai, which has asked for 50,000 additional weekly seats that will take the total to 1.13 lakh seats. Unlike in other cases, Indian carriers, too, have almost utilised all of their flying rights to Dubai.

“Look it's not a one-sided thing,” said Tim Clark, president at Emirates. “Indian carriers are now at the same cap as we are. They have been growing and growing and growing. They must go to the government and say ‘it makes no sense to cap the growth anymore because we as Indian carriers need to grow into Dubai and other places in the Gulf,’ I suppose.”

Not all is negative though. Airlines such as Lufthansa and Qantas are bullish about potential partnerships on ticketing and passenger sharing with Indian carriers such as Air India and Jet Airways, said their respective chiefs, Carsten Spohr and Alan Joyce.

Also positive is the government's talk of more airports.

In the budget for 2016-17, Finance Minister Arun Jaitley proposed developing 160 currently non-functional airports. The move, along with the government’s positive talk on regional aviation, gives confidence to a number of companies, especially small aircraft makers and international low-cost carriers

John Slattery, chief commercial officer of Embraer Commercial Aviation, said it is “conducive now for a larger fleet of regional jets to support secondary and tertiary market places”.

Embraer’s only Indian customer is southern regional airline Air Costa, which flies the 110-seat E190 jets and Slattery hoped this will change.

“The current administration has now adopted a planned strategy to open up regional aviation. And they seem very serious about it. So, for sure, we think now is the point of inflection if you like, for regional aviation to take off,” he added.

Adel Abdullah Ali, group CEO at Sharjah-based budget carrier Air Arabia, supported the idea. "I think building these airports is a fantastic model that connects people, makes the journey much much shorter for everyone and creates some jobs in those smaller cities,” he said. “If you want any city or town to develop, opening airports is very important.”
(This reporter was in Dublin on the invitation of IATA)