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Grounded by air traffic control freaks

Privatisation has actually worked to the disadvantage of airlines. Because the new owners of metro airports have not been able to make the kind of money they had expected, the government has allowed them to increase the amount they charge airlines, writes Vir Sanghvi.

columns Updated: Aug 26, 2009 20:26 IST
Vir Sanghvi

Perhaps by the time you read this, good sense will have prevailed. But as things stand now, there is no doubt that the owners of India’s private airlines are nuts. Their threat to suspend all services for a day on August 18 is plain crazy. It brings back memories of the era before the private aviation boom when we were all utterly dependent on Indian Airlines and thus subject to lightening strikes by pilots, traffic assistants, baggage handlers and the like.

The private airlines are complaining about government policy. Why then should they direct their ire at those who are blameless: India’s passengers? It surprises me that they haven’t recognised how uncaring they seem and I hope they will reverse their stand.

That said, I’ll come clean: I am on the side of the airlines. I condemn this crazy threat of suspension of services. But there’s no doubt that they have a genuine grievance.

To understand why private airlines are important you need to go back to the bad old days when Indian Airlines held us to ransom. Quite apart from the utter irresponsibility of its staff – for instance, the pilots chose to go on strike right after the demolition of the Babri Masjid as India burned — there was also the absence of choice. We had to travel Indian Airlines whether we liked it or not. And because Indian Airlines recognised this, it never really gave a damn about passengers.

In the case of Air India, global competition was not enough to make it improve its service. Years of government interference had destroyed the soul of the airline and driven away every capable manager. While airlines from such Asian countries as Singapore, Malaysia and Thailand were praised all over the world, the mediocrity of Air India was taken as proof that Indians didn’t know how to run quality airlines.

The private airlines changed all that. Nobody who has travelled Jet or Kingfisher on an international sector will dispute that they are easily the equal of any far-eastern airline and far superior to European and American carriers. Indians do know how to run quality airlines — it was only the government of India that prevented us from doing so earlier.

Domestically, the benefits of competition have been such that even Indian Airlines has been forced to woo customers. Indian passengers have a greater choice than ever before. What’s more, the real cost of flying (adjusted for inflation) has plummeted over the last decade. The cost of the average air ticket today is 50 per cent of what it was five years ago.

So, what’s the problem? Is it that like Air India, the private airlines are begging the taxpayer to pump in thousands of crores to make up for all the funds that have been squandered by governmental mismanagement?

Quite the contrary. Though the term bail-out has been flung around by the media, the airlines are not asking for a penny of taxpayers’ money. All they want is a fair deal in some areas.

About a third of every airline’s costs are made up by aviation fuel. India has a bizarre system where states are allowed to charge taxes on aviation fuel that can push up costs. Aviation fuel can cost 60 per cent more in India than abroad. Worse still, a strange discriminatory system means that India’s domestic airlines will pay more for fuel they pick up in India than a foreign airline will pay for exactly the same fuel also in India.

Apparently, this has something to do with bilaterals. You don’t have to be a patriot to realise that this is vastly unfair. Any reasonable government would change this and put pressure on the states to reduce taxes so that the private airlines are not crippled.

The airlines are also complaining about airport charges. Most airlines in the West spend something like three to four per cent of their total cost on airport charges. In India, where the airports are not even very good, airlines have to pay something like ten per cent of total cost.

Privatisation has actually worked to the disadvantage of airlines. Because the new owners of metro airports have not been able to make the kind of money they had expected (at least until they develop the real estate at which stage they will have a licence to print money), the government has allowed them to increase the amount they charge airlines. Since privatisation, charges at metro airports have risen by 82 per cent. What’s more, even passengers are now being made to cough up several hundred rupees for the airport owners each time they travel.

The airlines argue that this is unfair. Airports are monopolies. But the government allows them to charge punitive rates. Each time they need more money, they simply grab it off you, me and the airlines.

Does it make sense to enrich airport developers who have done so little for Indian passengers by robbing private airlines who have transformed travel for Indians?

The answer is obvious.

If the government stops pampering the airport developers and brings airport charges down and if aviation fuel is available at international rates, then the private airlines are okay.

They won’t make a profit. But that’s fine. In capitalism, you expect to do badly when the industry faces a global slump.

But equally, they won’t be in the mess they are in today and on the verge of extinction.

However, if the government does not move in these two key areas, then we are looking at the impending death of the private aviation sector. It’ll be back to the monopoly of the state-owned carrier and all of us will be at the mercy of uncaring staff and striking pilots.

For four decades, the government of India screwed up the aviation sector and made life hell for the Indian passenger. It wasn’t till the private airlines came along that we had quality service, reliability and a real choice.

And now, the way the government is going, it will screw up this sector again. And yes, it will make life hell for Indian passengers. All over again.