Indian Aviation Crisis

FIRST, THE GOOD NEWS: India is set to become the third largest aviation market in the world by 2025, behind China and the United States, according to a report by the International Air Transport Association (IATA).

- Minhaz Merchant

The bad news? India’s airlines are facing an existential crisis, buffeted by high fuel costs, low ticket prices and clogged airport infrastructure. India’s current annual airline passenger traffic is over 150 million. It is expected to double by 2025 and more than triple to 478 million passengers by 2036.

According to a Bloomberg report by David Fickling, “For all the disagreement in the industry about the future of aviation, there’s perfect accord on one point: there’s going to be a lot more of it. The world’s air passengers flew a combined 7.64 trillion kilometers (4.75 trillion miles) in 2017, according to Boeing Co’s latest 20-year market outlook. By 2037, that will rise to 18.97 trillion kilometers, with about 40 per cent of the increase happening within five intraregional markets: China, India, North America, Europe and Southeast Asia.

“That’s sparking a battle over the biggest bottleneck holding back this growth: airports. The governments that still own many of them should be more open to privatisation to cover a $78 billion funding gap in needed capital investments, the Airports Council International, an industry group, argued in a report earlier this year.”

The aborted sale of Air India and the financial crisis in Jet Airways symbolise the mismatch in the country’s aviation sector: great potential but poor planning. In the 25th year of its operations, Jet Airways is bleeding. Pilots are being allowed to leave the airline with just 48 hours’ notice rather than the normal six months period. The airline has 2,000 pilots (including foreign pilots) and 16,000 employees. Clearly, it is overstaffed but the rising cost of aviation turbine fuel (ATF) and a weak rupee have made matters worse. Caught in a low-priced ticket environment, Jet’s ability to increase revenue is limited.