The Financial Express
The fact that civil aviation has returned to a semblance of pre-pandemic normalcy is certainly good news for a sector that tracks the India growth story. Union civil aviation minister Jyotiraditya Scindia is upbeat regarding the post-pandemic revival in domestic passenger traffic in an interview to this newspaper. According to him, the daily domestic passenger traffic hit an all-time high of 455,000 in March—which is normally in the off-season—that is much higher than during the pre-pandemic period. Domestic passenger traffic growth during January-March was up by 8% when compared to the corresponding pre-pandemic period of 2019. The minister expects air traffic to double in 4-5 years. The historic fleet acquisition plans by Air India and Indigo in fact reflect a long-term bet on the bullish prospects of the civilian aviation industry. To support this growth in traffic, the number of airports has increased from 74 to 148. The regional connectivity scheme—Ude Desh ka Aam Nagrik or Udan—has ensured connectivity with smaller towns and remote parts of the country and has made air travel more affordable for the masses. Around 73 hitherto unserved or underserved airports have been operationalised under the scheme.
While the minister outlined supply-side measures like increasing the number of airports, there are several challenges that need to be addressed. Last December, the growing passenger footfalls in the major metropolitan airports resulted in severe congestion with long lines at check-in, security and immigration with passengers even missing their flights. The supportive infrastructure must therefore be in place to cater to the ongoing boom with air traffic set to double in 4-5 years. More investments are needed not just for additional green-field airports but also for expansion of existing airports and building of new terminals. The domestic airlines’ fleet expansion plans also entail a massive increase in the number of pilots and cabin crew. Air India, for instance, requires more than 6,500 pilots for its order of 470 aircraft. How will this be met? The government’s response is that it has liberalised policies on flight training organizations to augment pilot training capacity in the long run.
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The biggest challenge is improving the financial health of domestic airlines in a high-cost environment. The airlines registered huge losses of Rs 17,500 crore last fiscal as they have having no control over costly aviation turbine fuel which accounts for one-third of operating costs. Moreover, when they lease aircraft, they pay rentals in costly US dollars while revenues are in depreciating rupees. They must fly back into profitability if the boom in passenger traffic is to turn into a virtuous spiral of investment-led growth. Unfortunately, the demand-driven Udan scheme does not help their bottom-line as the returns are less on new routes to smaller towns and remote parts of the country. Bihar, for instance, was keen to connect Begusarai and Birpur airstrip situated in Supaul district under the scheme but no airline has submitted bids to operate flights. The Karnataka government has come up with its own solution to make Udan work better. With the recent inauguration of the Shivamogga airport, it has reached out to air carriers with an assurance that they will underwrite some seats for a period of time as reported in the FE. If Udan is to fulfill its promise, the scheme clearly needs further tweaking to regenerate interest from the established airlines.
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