India needs a thriving aviation sector, but for that to happen it has to ensure one or two players do not dominate the sector. Currently, there is a clear duopoly with IndiGo and Tatas (through Air India, Air Asia and Vistara) enjoying 90 percent of the market share. The two big players strengthened their grip over the market after Go Air went out of business in May this year. Meanwhile, SpiceJet, which has been struggling with its finances, and Akasa, which has been seeing many of its pilots leave, keep losing their market share to the big two. While smaller players need to get their houses in order to thrive in the business, the government must ensure the cost of airline operations does not go through the roof.
Aviation turbine fuel (ATF) costs account for around 40 percent of the operation costs of airlines in India. While international crude oil prices have a direct bearing on the ATF prices, high and complex taxes on ATF in India make the situation worse for airlines. There have been demands to bring ATF under the Goods and Services Tax. This will serve two purposes—taxes will be lower and airlines will be able to claim input tax credit on GST paid on fuels. The government must also ensure that airports do not charge unnecessary fees from airlines or passengers. An airline spends 8-10 percent of its total expenses on airport charges such as landing fees, parking fees and aerobridge fees. The aviation industry, along with the government, also needs to find a solution to the skill deficit in the industry. Indian airlines are severely constrained by the shortage of pilots, and the same was evident from the recent crisis in Akasa Air. India needs to develop domestic capabilities for aircraft maintenance and repair. Engine problems and a shortage of mechanics ensure over 20 percent of airlines remain grounded.
The aviation sector is a difficult business to be in. Scores of airlines, including big names such as Jet Airways and Kingfisher, have shut shop. A strong aviation sector can propel growth for an expanding economy like India’s. The government has ensured over the years that the aviation infrastructure expands and newer towns are connected through air. However, unless the running costs of the industry are within the scope of commercial viability, the sector cannot prosper.
16/10/2023 New Indian Express
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