Sunday, February 18, 2018

Civil aviation in India: Flying high despite glitches

The civil aviation sector in India, in 2017, came on primetime news for all the wrong reasons. There were two main issues that were highlighted in the print and electronic media. One was the strategic disinvestment of Air India while the other was on the incidents of clashes between the passengers (some high profile ones) and the airlines crew.

But the good news which is yet to capture the public eye is the rapidly increasing size and growth of the sector. According to the Director General of Civil Aviation (DGCA), the first 11 months of 2017, recorded 10.6 crore people who flew within the country compared to 9.9 crore during the whole of 2016, improving further when the December 2017 value gets added. In fact, there could be a better rise, in view of the fact that the November 2017 passenger count of domestic travelers recorded a phenomenal growth of 17 per cent over its  corresponding  figure for November 2016.

While these statistics can be considered healthy, there are skeptics who suspect base effect as the reason for such a growth in November 2017 because of November 2016 being the famous ‘demonetisation month’. But such skepticism is unwarranted as the Government of India’s official figures, released at the end of December 2016 did specify that demonetisation had very little, if at all any, effect on air travel.

One thing that is clear is that passengers travelling by air, in India, are definitely on the rise and the year-on-year growth for individual months is also showing a visible increase, notwithstanding the small fluctuations here and there. The civil aviation industry in India has thus emerged as one of the fastest growing industries since 2013 and India is currently considered the third largest domestic civil aviation market in the world. The International Air Transport Association (IATA) is predicting a rapid growth for this sector in India in the coming years too.

Rise in personal disposable incomes is definitely one of the reasons for this growth in this sector. Apart from this, there is an interesting scheme called UDAN-Ude Desh ki Aam Nagrik (let the common citizen of the country fly) which can have a potential impact on future ridership. This is a Regional Connectivity Scheme (RCS) of Government of India aimed at making air travel affordable. The scheme also seeks to boost air transport infrastructure development of all regions and states of India. Under this initiative, the airlines will have to sell a required number of seats by capping the price at Rs 2,500 per hour of flight journey to regionally underserved airports. The Government will compensate them for this.
As a part of this scheme, several underserved regional airports are developed and their operational readiness is enhanced. The Government compensation to the airline operators is   through a Viability Gap Funding (VGF) model with contributions from the Union Government, State Governments and Airport Operators. Five  airlines were awarded 128 fixed wing flight routes to 70 airports in the UDAN-RCS Round-I bidding held in April 2017. Recent data tells us that around 13 regional airports have commenced RCS UDAN operations.
18/02/18 Srinath Rangarajan/Pioneer