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‘Turbulence in airline industry is short-term’

Aviation minister talks about the challenges facing the sector and how he plans a turnaround
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First Published: Sun, Oct 14 2012. 11 37 PM IST
Singh says issues such as the cost of aviation turbine fuel and high charges at airports need to be addressed. Photo: Pankaj Nangia/Bloomberg
Singh says issues such as the cost of aviation turbine fuel and high charges at airports need to be addressed. Photo: Pankaj Nangia/Bloomberg
Updated: Mon, Oct 15 2012. 12 53 AM IST
Mumbai: Ajit Singh, an alumnus of Indian Institute of Technology-Kharagpur, is seen as the most proactive aviation minister. He has refined policy to encourage airlines to buy smaller planes and brought jet fuel under the so-called declared good status to reduce costs.
Most recently, Singh stepped in to ask the state-run airport body to stop charging airport development fee, the first minister to do so.
He has also issued a show-cause notice to Kingfisher Airlines Ltd, asking why it should be allowed to fly, and cautioned the European Union (EU) on taking unilateral decisions on imposing carbon tax on Indian carriers. Singh is also bringing the public-private partnership (PPP) model back to the airport modernization programme.
Singh, 73, is determined to see the industry in a better shape. The bids for Navi Mumbai international airport will be out by end of the fiscal year and there will be more incentives for small planes connecting smaller cities, he said in an interview. Edited extracts:
You seem to be a proactive minister.
The aviation industry has to survive and for that you have to take a lot of action. This is the case with all sectors, be it airlines or airports. You need to take tough decisions. This is nothing special or extraordinary, but simple common sense. The bottomline is we have to make air travel affordable to the growing middle class. There are many issues to be addressed, including the cost of aviation turbine fuel (ATF) and high charges at airports.
You had asked Chennai and Kolkata airports to do away with airport development fee. Would you do the same for Mumbai and Delhi airports?
The Airport Economic Regulatory Authority (Aera) is a quasi-judicial body. It decides the tariff for airports at Mumbai and Delhi. I can only ask the state-run Airports Authority of India (AAI) to do away with airport development fee. One will have to request Aera about other airports. The Chennai and Kolkata airports are just the beginning.
On 10 October, advertising agency TDI International India had paid Rs.61.85 crore to the AAI to settle dues after your intervention.
They had paid as it is a good contract for them. Why shouldn’t they pay? I had told them to do that or else I will cancel the contract.
You plan to take retaliatory measures against the EU for unilateral decisions on imposing carbon tax on Indian carriers.
The government has opposed unilateral inclusion of Indian international flights to and from EU airports in the European Union-Emissions Trading System (EU-ETS). We have asked the Indian carriers not to participate in the EU-ETS. We are flying newer planes and the carbon dioxide emissions at international destinations is less than 1% of the country’s total carbon dioxide emissions.
We have already started calculating the carbon footprint of Indian airlines and airports as the aviation activity is largely now concentrating on India and Asia-Pacific region. The critical aspect is that if we allow the carbon tax on Indian airlines, next time they will impose such tax on ships. By the way, our ships are older. A country can make a law for its own sovereign nation, but it is not proper to make that law applicable to another nation.
Do you believe in Air India’s turnaround?
Air India will have to work very hard. It will have to adhere to certain milestones and performance parameters to qualify for a bailout by the Indian government. The employees of Air India should start believing that their future lies in the success of their carrier. There are signs of change in the culture of Maharaja.
You plan to move Air India’s headquarters to Delhi from Mumbai.
We are exploring the option for purely operating reasons. The top management is spending half its time in Mumbai and the rest in Delhi. Also, Air India could monetize the iconic building at Nariman Point in Mumbai. Air India does not need that much space in Mumbai.
You have plans to monitor both airfare and the financial health of airlines.
We are not here to regulate airfare though we have asked airlines to provide a band. But no one knows how many tickets are sold in the prescribed bands.
We are planning to set up a system where every airline will specify the details of the tickets and the basis of the price. We are not regulating but we are letting the public know the rationale behind the fares.
The DGCA (Directorate General of Civil Aviation) is taking stock of the financial health of airlines. Take the case of Kingfisher Airlines—the airline has not paid its dues to AAI, oil marketing companies and even the service tax. The government wants to monitor the financial health (of the airline) and its implications.
You were pushing for 49% investment by foreign carriers in local carriers. Is anybody interested in taking stake in Indian carriers?
The airline industry is complicated and capital intensive. Indian airlines should have the reach to domestic and international locations.
The state of the airline industry is not promising but this turbulence is a short-term phenomenon as the middle class of India is growing. Airplane manufacturers such as Airbus and Boeing are estimating that India will buy more planes in the next 20 years.
I am sure several foreign carriers would want to invest or tie up with Indian carriers at some point of time.
You were planning to implement a liberal traffic right policy for Air India and private carriers.
What we are looking at is a level-playing field for both Air India and other private carriers. For the same, the government has adopted a liberal policy to allocate traffic rights to private Indian airlines to various international destinations in addition to Air India. Historically, Air India has always been given priority in allocation of the traffic rights. The ministry has already asked various Indian carriers, including private carriers, their demand for the next three seasons beginning winter 2012. More traffic rights under bilateral agreements will be allocated liberally as per demand and this process will be completed this month.
Many of your predecessors talked about resolving the issue of ATF, which costs 70% more in India compared with international markets.
The ATF issue works both ways. ATF constitutes approximately 40-50% of operating expenses of Indian airlines. The major contributor to the high prices of ATF is the value-added tax (VAT) levied by state governments, ranging from 4-30%.
Unfortunately, the finances of the states are not in a very good shape. Though the efforts are on to persuade the states to reduce VAT on ATF, the ministry is trying to rationalize the price of ATF by declaring it as a notified product and bringing it under the ambit of the Petroleum and Natural Gas Regulatory Board.
To add, Indian carriers have been allowed to import ATF directly. The on-site and off-site transmission infrastructure for the import of ATF has to be ensured.
You are bringing back the public-private partnership (PPP) model of airport development.
The larger idea is to build more greenfield airports to enhance connectivity. We are talking about developing greenfield airports in Navi Mumbai, Goa and Kannur under the PPP mode. The bids for Navi Mumbai airport should be out by the end of this fiscal.
We are not just talking about big airports. We are aiming at small airports that can handle smaller planes. We will encourage the airlines to buy more smaller planes to connect smaller cities.
We will have to find ways and means to subsidize these feeder planes. We are planning a series of steps to promote these smaller planes connecting tier-II and tier-III cities. We are also considering the regional airlines code-sharing with bigger schedule carriers. Some of the states such as Gujarat, West Bengal and Madhya Pradesh are guaranteeing certain number of seats to these smaller operators to make it viable. We plan to incentivize regional airlines and non-scheduled operators.
Emirates, Etihad and Qatar Airways are taking Indian passengers and creating huge airport hubs in Dubai, Abu Dhabi and Doha.
People are flying Emirates Airline not just to Dubai, but beyond through other connections. India should also aim to get more passengers to redistribute through Indian airports. An Indian passenger should be able to take a direct flight to international destinations from Varanasi, Lucknow and Trichy. Therefore, Indian carriers should start more international operations from more Indian cities.
India can develop several hubs in Mumbai, Delhi, Chennai, Hyderabad, Bangalore and Kolkata.
You have asked Lufthansa to reconsider Air India as member for Star Alliance.
We had given Lufthansa several cities to fly out of India and it was supposed to mentor Air India as the member from India. I understand that there were some standards Air India could not meet in the entry to Star Alliance. But Air India is recovering and now Lufthansa would be able to mentor Air India into Star Alliance.
Give us an update on your show-cause notice to Kingfisher Airlines.
Kingfisher Airlines was not adhering to the schedules that it promised in past several months. Its employees were on a strike for just a day or a half-day but its engineers too went on a strike, affecting the maintenance standards of aircraft and hence, the show-cause notice.
You were asking companies to set up an aircraft component manufacturing facility in India.
We were concentrating on airlines till this time. Now the airline industry is on a take-off mode and we should have ancillary industries in India. This could be maintenance, repair and overhaul (MRO) industry and aircraft component manufacturing facilities that can produce doors, beams, etc. The government has some plans and allocation of resources for this, the details of which are not disclosed as yet. Some big companies are keen to invest.
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First Published: Sun, Oct 14 2012. 11 37 PM IST
More Topics: Ajit Singh | airports | DGCA | airlines |