Tuesday, April 03, 2018

Big changes in aviation sector

As disinvestment of Air India seems set to become a reality, political leaders are voicing concerns. West Bengal Chief Minister Mamata Banerjee is worried about the country selling off its “jewels”, while BJP leader, Subramanian Swamy is watching closely to ensure a scam does not take place. Some fears are not misplaced as the government is in the process of selling an entity that has enormous value in terms of physical assets as well as human resources.
The sad reality is that as a government company it has not been able to operate profitably and saddled the exchequer with a huge debt burden. The failure of airlines to operate profitably as so-called national carriers is a global phenomenon and not confined just to this country. British Airways, Lufthansa, Alitalia and many others have been privatised over the years for much the same reasons. Public sector airlines have not been much of a success. In the case of Air India, the problem was compounded by the disastrous decision to merge it with the erstwhile Indian Airlines, creating an unwieldy giant.
The disinvestment process is taking place at a time when there has been a quantum leap in the amount of passengers travelling by air. Over the past six years, the number of persons travelling by air has already risen from 60 million annually to 117 million. With an 18 per cent growth in passenger traffic recorded in 2017, the share of air in combined air and rail travel is set to rise to 15 per cent by 2027, as against nearly 8 per cent currently. Aviation companies are already gearing up to meet the higher demand volumes by ordering large numbers of aircraft from abroad. The existing domestic fleet of 548 aircraft is set to be augmented by another 920 by 2025. The net result will be that India is poised to become the third largest airline market after the US and China over the next decade.
These are big developments for the civil aviation industry in a country that once was dominated only by a single public sector airline. The domestic skies have undergone a revolution of sorts. What is more important, however, is that these changes end up providing a more efficient and cost-effective mode of travel for business and pleasure.
As far as consumers are concerned, the plus point of having many private players is that basic prices have reduced but there are several additional costs now imposed by airlines. A few years ago, it had become possible for potential rail travellers to shift to air by just spending slightly more for their fare. This situation no longer exists as fares between most major cities have now become volatile depending on demand and seasonality. In addition, the so-called budget airlines have begun charging extra for seat selection while cutting back on luggage allowances and charging hefty cancellation fees. In fact, it is often becoming more economical to travel by the full service airlines owing to all these additional expenses.
03/04/18 Sushma Ramachandran/Tribune