November , 2019
Opportunities and challenges in the aviation sector
14:55 pm

B.E. Bureau

The Bharat Chamber of Commerce organised a national seminar and an exhibition on the ‘Indian AviationSector: Opportunities and Challenges’ at the Park Hotel, Kolkata. The prospects of private participation in maintenance, overhaul, and repair were discussed.

The aviation sector in India contributes $72 billion to GDP. Over the last four years, India’s aviation market has grownat a yearly average rate of 20%, which is among the fastest in the world. However, it is not free from problems includinghigh costs and low yields. There have also been persistent technical issues plaguing two of the most popular passenger aircraft models flown by India’s airlines. These factors have plunged India’s aviation industry to its most precarious phase in the last five years or so. The government is planning to sell Air India along with Bharat Petroleum to meet its disinvestment target of `1 lakh crore for the current fiscal year.

Dr. H. P. Kanoria, Chief Mentor, Shristi Infrastructure Development Corporation, said during the seminar, “Due to their passion, entrepreneurs entered the aviation sector when the opportunity was given to them. Failure of a number of private sector players including Modiluft, Damania Airways, Air Sahara, East West Airlines, Jet Airways, and Kingfisher pose a question as to why they failed.”

He added, “Almost all the airlines are incurring heavy losses. IndiGo made a loss of `1070 crore in Q2 FY 2020, much higher than the Rs 650 crore, the corresponding quarter last year. It has not been able to increase its market share. Vistara doubled its losses to the current `831 crore in

FY 19 over the previous year.” The Centre for Asia Pacific Aviation, for instance, had projected that there will be an additional 90 planes in FY 2020 (which did not include any increase by Jet Airways) from around 625 planes in FY 19 to 715 in FY 20. It had estimated that capacity growth would be up by 20% in FY 20. Jet Airways has incurred a loss of around ` 800 crore in financial year ending March 31. Despite induction of fund from other companies, Kingfisher was shut, due to continuous losses.

Air India has been incurring heavy losses. It is incurring losses about `4000 crore per year. It has accumulated loss of over Rs 65000 crore.

There is a similarity between the aviation sector and telecom sector. The telecom companies have decided to raise tariffs and there will be a similar financial strain, if the airline companies do not follow the pricing discipline.

Dr. Kanoria tried to point out the reasons why the airlines are not making a profit. He said, “Fuel prices constitute about40% of the cost for operation of Indian carriers. Crude oil price is very high, steep taxes on aviation makes Indian carriers less competitive against global players. MRO’s cost is very high. Aircrafts are being sent for major overhaul. Due to high GST, MRO is less competitive. Air India does not send aircraft for MRO to other countries.” The leasing cost of aircraft has also become higher due to depreciating value of rupee. High airport charges levied by the air authority are also denting into the operation and realisation.

Dr. Kanoria continued, “How long can the private companies sustain with these losses? The government has to search for a reason out of this and has to see that all regions have sanctioned money. MROs need to send their crafts to other countries. They should also tie up with larger MRO companies, for instance, the MROs in Germany.”

Sitaram Sharma, President, Bharat Chamber of Commerce said, “The government also needs to create policies that will enable creation of MSME clusters with quality infrastructure and building capabilities.” He added that there are roughly 500 MSMEs across different clusters in the aerospace sector but they are fragmented and yet to evolve.


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