Home' Asian Aviation : AAV_February 2013 Contents 28 AsianAviation | FEBRUARY 2013
As regional airlines await a new Regional
Aviation policy, a report on which is being
prepared by Deloitte India, plans and
projects continue to be announced in an
In October, India's aviation minister
announced that approval had been
granted for 15 greenfield airports,
including a new metro airport in Navi
Mumbai and regional airports in Mopa
(Goa) and Kannur, where work was
expected to commence within this financial
year -- meaning by the end of March.
There are no signs of movement as yet.
The construction of regional airports
in India requires careful consideration of
various developmental aspects with long-term
implications. Land availability is increasingly
becoming a hurdle to expansion.
The country now has 457 functional
and non-functional airports. Of these, 91
are managed by the Airports Authority of
India (AAI), and 125 by the military.
Ailing national carrier Air India received a boost
last year when the government approved a
turnaround plan to restructure the finances of the
cash-strapped carrier, including the infusion of
By early January six of the 27 Boeing 787s the
company ordered in 2005 had been delivered.
Analysts say the new aircraft have helped in
route restructuring and by boosting operational
By gradually replacing its older aircraft with the
more fuel-efficient 787, the airline hopes to reverse
five consecutive years of losses. Following an
order for 111 aircraft, average age of the carrier's
fleet has been reduced considerably. Of the 112
aircraft now in the company's inventory, 87 are
new, with an average age of 2.5 years.
"If Air India has an outside chance of achieving
a successful turnaround, the time is now," says a
report by the consultancy Centre for Asia Pacific
Aviation (CAPA). "With no significant capacity
induction expected in the overall domestic market,
the carrier should be in a position to maintain its
improved yields and load factors. Meanwhile,
the financial restructuring plan should result in
a significant reduction in overall interest costs,
thereby reducing losses at the net level."
CAPA India, however, has voiced concern that
Air India may not have the capacity to fully leverage
the demand in the market, as it has only about 45
aircraft dedicated purely to domestic operations,
which is insufficient for a sustainable turnaround.
As part of its turnaround plan, Air India decided
to spin off its engineering subsidiary into a
separate business, called Air India Engineering
Services, which is likely to become operational
soon. The ministry of civil aviation is looking at
selling off a part of the subsidiary after hiring
a foreign executive to head it. However, the
divestment plan is presently facing resistance
from Air India's labour unions.
Civil Aviation minister Ajit Singh recently asked
the carrier to reduce its monthly revenue shortfall
by implementing cutting expenses related to
salaries,overseas officesand fuel. "Air India should
think out of the box to change its image of being a
public sector unit and transform it to a commercial
organization," Singh said.
"The government recently amended its rules
and allowed foreign airlines to invest in Indian
carriers, but moves such as these indicate that
policy changes with every minister," he told the
International Air Transport Association (IATA)
Director General and CEO Tony Tyler has repeated
in various forums that India will need to reduce
the high cost of operations before it makes further
progress. "No, I don't think it (allowing foreign
airlines to invest in Indian carriers) is a game
changer, but it is a good thing... It certainly is a
step in the right direction, but it is not the panacea
that some believe it is," Tyler said to Indian news
wire PTI recently.
"As long as high taxes prevail, high airport costs and
congestion -- and poorly developed air navigation
(services) mean more congestion -- [then] you are
not going to get a lot of people to invest in airlines,"
Merely investing fresh capital will not solve the
problems of the industry, he said. The capital "has
to be used in a way to improve the business in some
way. It can be used to grow the business. If the
business is loss-making then some of it needs to be
used to restructure."
High airport costs are impacting domestic air
traffic, Tyler adds. "The Indian airport costs, let us
not kid ourselves, remain a big problem... Domestic
traffic has been in decline recently. High airport costs
have to have something to do with it," he said.
Declining air traffic is a concern too. High operating
costs are "going to reduce the amount of operations"
airlines will carry out. Then, they will no longer "be
able to put fares in the market that will keep people
flying," Tyler said.
AIR INDIA RESTRUCTURES
AIRPORT PLANS LACK
"As long as high taxes prevail, high
airport costs and congestion ... [then]
you are not going to get a lot of people
to invest in airlines." -- IATA chief Tony
Qatar Airways has denied reports that it was negotiating to invest in SpiceJet.
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