It will take a lot of tinkering to stay afloat

  • Jitender Bhargava
  • Updated: Jan 07, 2015 22:57 IST

The financial turbulence being faced by SpiceJet, within two years of the Kingfisher Airlines’ (KA’s) collapse, puts the spotlight on the infirmities in the aviation sector and also questions our ability to address them.

When Air India (AI) and Indian Airlines (IA) were the only two operating airlines, their ‘unsatisfactory’ performance was attributed to government ownership, mismanagement and unproductive staff. Privatisation and professionalisation were advocated as a remedy, overlooking the real causes. Now that we have several private airlines biting the dust, we must address those systemic weaknesses.

The two national carriers, which were in business since 1953, should have provided the expertise to the sector when the skies were opened up. But that did not happen, giving rise to a mistaken notion that expertise was not needed to steer the sector.

The government kept on appointing IAS officers to lead AI when the need was to get experienced men from the sector. Unsurprisingly, India did not have a comprehensive civil aviation policy for decades. To show that the aviation sector was doing well, the government showed growth in the number of passengers. This is nothing short of deception because it was a consequence of the growing middle class and low fares.

This happened despite many private airlines getting expat CEOs/COOs. If they failed to place their airline on a financially sound foundation, it was because of systemic weaknesses in our operational environment. Their efforts were restricted to sales tax levied on air turbine fuel (ATF), which was one issue, but not the main cause of high fuel pricing.

The lack of a plan and expertise meant policies were being formulated as reactions to emerging situations. When KA faced problems, the government allowed airlines to import ATF but no airline availed of this facility because it was not viable. The decision to allow acquisition of up to 49% stake in Indian carriers by foreign airlines came so late that KA couldn’t avail of it. Jet Airways could reap the advantage of this decision because the government facilitated the acquisition by granting an unprecedented 37,000 seats to Abu Dhabi.

Ironically, the government believed that doling out seats to foreign carriers was their main function. It never occurred to them that they were mortgaging national interest and that no Indian carrier will be able to withstand competition from foreign carriers who had not only enjoyed a first-mover advantage but also had a stranglehold on the market. Aviation minister Ashok Gajapati Raju has been prodding Indian carriers to use the available seat entitlements but is finding no takers because they don’t have the financial muscle to sustain operations on routes that are competitor-dominated. It is a tragedy that Indian carriers are facing a disadvantageous situation in their home market. No other country has allowed such exploitation.

That India did not prepare itself for placing the sector on a firm foundation is evident from our failure to evolve a comprehensive aviation policy; so many airlines are collapsing due to operational environment: Indian carriers not growing at a pace the market is growing; international level maintenance, repair and overhaul (MRO) are not being established, thus forcing Indian carriers to send aircraft abroad for major maintenance, and finally, our failure to protect downgrading by the United States of our safety regulatory agency last year. By allowing a majority of Indian passengers to be flown by foreign airlines, India has passed up several other related opportunities: Buying many more new aircraft, expanding airports, providing employment to sector professionals. If competent people aren’t available in India, the government then must get the best from outside as a vibrant aviation sector is critical to India’s dream of becoming a major economic power.

Jitender Bhargava is former executive director, Air India, and author of The Descent of Air India

The views expressed by the author are personal

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