Let’s talk about what’s happening in the aviation sector:
- Quite a lot flights are not taking off
- Staff are striking,
- Luggage is not being loaded or are going missing,
- Pilots don’t want to fly
- Airports want airlines to cut capacity but airlines won’t oblige
- Queues are long and passengers are suffering
India’s ailing Aviation Sector
- It is facing a unique crisis a crisis of credibility and safety. Let me show you some recent headlines to start with.
- The windshield of a go air flight cracks mid-air, two go air flights suffer engine snags, a flight could not take off because of a dog on the runway.
- A bird was found in the cockpit of an Air India Express cruising at 37 000 feet.
- One flight suffered an engine snag another noticed smoke in the cabin.
India’s Aviation Industry: A backgrounder
- India is the world’s third largest aviation sector it is home to more than 150 million flyers every year.
- There are 15 airlines, two more will soon be operational and more than a million flights land and take off from India every year.
- The country has 137 airports and dreams of adding 100 more according to airbus. India’s domestic air traffic will grow five times in the next two decades.
- Nearly 90% of the aviation traffic is domestic and low-cost carriers account for nearly 70% of the domestic seats.
- The average domestic fare has fallen by more than 70% since 2005.
Why are India’s airlines suffering so many technical glitches?
- Why are there so many emergency landings you must have heard of the DGCA or the directorate general of civil aviation it is the government body that’s responsible for airline safety issues the dgca is blaming these snags on staff shortage.
- Every flight is inspected and certified before take-off.
- Aircraft maintenance engineers they’re called AME aircraft maintenance engineers.
- This malfunction is happening because of a shortage of engineers.
Who’s responsible for the shortage?
- You see a lot of airlines have outsourced engineering to whom the likes of Air India engineering which is still owned by the government of India then there is Artworks Max Aerospace group gmr, spice jet technique.
- Some of these companies are short of staff and this staff shortage is risking lives.
Reasons behind the Crisis
- In the past years, aviation was one sector that was shining in terms of double-digit growth in passenger traffic for many years.
- However, that too is currently seeing complications, reflecting the adverse growth in the general economy.
- It should be noted that the aviation sector is a very high multiplier of both economic growth and employment and any downturn would affect the economy itself.
- However, airlines are currently in a financial mess.
(1) Pandemic incurred losses
- Indian airlines and airports incurred financial losses worth Rs 22,400 crore in the last financial year amid the coronavirus pandemic, according to official data.
- Besides, 75 per cent of Airports Authority of India-operated airports are incurring losses. Also, AAI’s revenue came down to Rs 889 crore during April-June this year.
(2) High fuel prices and taxes
- As far as the domestic sector is concerned, airlines work at a huge disadvantage as they are burdened by high taxes and levies at one end and high Air Turbine Fuel (ATF) prices on the other.
- The ideal cost of ATF should not exceed beyond 25% of the total operating cost.
- A central excise imposition of 14% and sales tax levied by the state governments on ATF can be as high as 30%.
- Attempts to bring ATF under GST and cutting it down to 12% have not been accepted by the GST Council.
(3) Rupee depreciation
- Any deterioration of the exchange rate of rupees to the US dollar also causes adverse impacts on the profits of the airlines.
- Deterioration of international fuel prices also plays a role.
- Due to this toxic mix, the operational cost in the domestic sector remains high.
(4) Economics of tickets fare
- Due to the large order of planes, the total capacity of seats is increasing, leading to the increasing need to fill up the growing availability of seats.
- Thus, airline ticket prices are decided by algorithms that change fares based on several factors like past bookings, remaining capacity, average demand per route, probability of selling more seats later etc.
- This computer-based dynamic pricing system causes passengers acute distress during holidays/festivals or calamities when price sharply increase.
(5) Airport and aircraft maintenance
- The Airports Authority of India (AAI) is the custodian of all civil airports in India.
- While a dozen airports are profitable, the rest are cross-subsided by AAI.
- Airport improvement involves not just upgrading the terminals, but also the runway, navigational aid and equipment needed for the safety and security.
- The AAI is currently leasing out bigger airports on a long-term basis.
- However, the lessee company is selected based on the highest percentage of revenue it can share with the AAI.
- The Delhi International Airport share 46% of its revenue while Mumbai is a little less. The newly privatized airports are even higher.
(6) Skill shortage
- Although India has the world’s second-largest population, the aviation industry faces a severe shortage of skilled workforce.
- The low-quality training institutes are not training the necessary engineers, technicians and other professionals to meet the demand of this sector.
- These are the reasons behind aircraft maintenance engineers.
(7) Disproportionate workforce
- While some airlines like Air India have surplus manpower, some like IndiGo are suffering from manpower shortage.
- In fact, the surplus manpower of Air India is one of the major causes of its financial crisis.
(8) Congestions at airports
- India’s major airports suffer from congestion of passengers and limited runways.
- For instance, Mumbai Airport, which is a single runway airport handles over 900 flights each day on an average.
- That is approximately 38 to 40 flights each hour.
- Thus, congestion leads to delay in operations and a decrease in the operational efficiency of both airlines and airports.
Impact of such incidences
- These incidences are hurting India’s image in recent weeks.
- Several Indian flights had to make emergency landings abroad, even in Pakistan.
- Now India and Pakistan don’t have an aviation agreement the two countries, do not have direct flights and they don’t see eye to eye we know that.
- What about India, the world began questioning India’s aviation sector. The repeated technical snags are making headlines in West Asia in the UK.
- This raises concerns about flight safety in India and Indian carriers.
Another aspect: Ambitious UDAN Scheme
- The Ude Desh Ka Aam Nagrik (UDAN) scheme is a low-cost flying scheme launched with the aim of taking flying to the masses.
- The first flight under UDAN was launched by the PM in April 2017.
- It is also known as the regional connectivity scheme (RCS) as it seeks to improve air connectivity to tier-2 and tier-3 cities through revival of unused and underused airports.
Working of the Scheme
- Airlines are awarded routes under the programme through a bidding process and are required to offer airfares at the rate of ₹2,500 per hour of flight.
- At least 50% of the total seats on an aircraft have to be offered at cheaper rates.
- In order to enable airlines to offer affordable fares they are given a subsidy from the govt. for a period of three years.
- A total of nine rounds of bidding have taken place since January 2017.
- The Ministry of Civil Aviation has set a target of operationalizing as many as 100 unserved and underserved airports and starting at least 1,000 RCS routes by 2024.
- So far, the Airports Authority of India (AAI) has awarded 948 routes under UDAN, of which 403 routes have taken off that connect 65 airports.
- Out of the total 28 seaplane routes connecting 14 water aerodromes, only two have commenced.
Issues with the UDAN
- Discontinuance: In reality, some of the routes launched have been discontinued as most of the routes awarded under UDAN are not active.
- On-paper Ambitions: UDAN was expanded to provide improved connectivity to hilly regions and islands through helicopters and seaplanes. However, they mostly remain on paper.
- The reasons include:
- Failure to set up airports or heliports due to lack of availability of land
- Airlines unable to start flights on routes awarded to them or finding the routes difficult to sustain
- Adverse impact of the COVID-19 pandemic
- Lack of funds: Many small airlines await infusion of funds, to be able to undertake maintenance of aircraft, pay rentals to lessors, give salaries to its staff, etc.
- Maintenance issue: Many players don’t have more than one or two planes and they are often poorly maintained. New planes are too expensive for these smaller players.
- Availability of pilots: Often, they also have problems with the availability of pilots and are forced to hire foreign pilots which costs them a lot of money and makes the business unviable.
- Competition: Only those routes that have been bagged by bigger domestic players such as IndiGo and SpiceJet have seen a better success rate.
- Aviation is a critical component of the nation’s transportation sector and plays a pivotal role in economic growth and employment generation.
- Aviation could be a major growth engine to make India a $5 trillion economy by 2024.
- The government should look into the aviation sector holistically, as a part of the economy as it is going to play a crucial role in economic development and is no more a sector of the privileged class only.
- The current model of taxation of the civil aviation industry appears unsustainable.
- Therefore, fuel taxes should be brought under the GST to reduce the operation cost of the airlines.
- This sector has shown the indomitable spirit- never hesitant to be in the frontline by ensuring the safe movement of people and essential cargo during the nation’s fight against the pandemic.
- Some leeway at the right time will safeguard aviation to catch up the growth trajectory faster.