Aviation waited in wings for a new policy (2015 in Retrospect)

New Delhi, Dec 28 (IANS) If the revival of an airline and return to profitability of some others marked the highlights in 2015 in Indian aviation, the year also went by without the government spelling out its long-awaited policy for the sector.

All that the civil aviation ministry managed in the last 19 months was to come up with a draft national civil aviation policy (NCAP) which, nonetheless, has some far-reaching implications.

Among the proposals is one to scrap the 5/20 norm, which stipulates a minimum five years of operations and a fleet of 20 aircraft for oversees flying rights, and to peg a minimum tariff of no more than Rs.2,500 per ticket for each flying-hour.

The grand scheme, however, still hangs in the balance and awaits the union cabinet’s approval.

“Draft NCAP has contemplated many interesting proposals to promote growth in the aviation sector,” Amber Dubey, partner and head of aerospace and defence at global consultancy KPMG, told IANS.

“Its vision to enable 300 million domestic ticketing by 2022, although ambitious, highlights the potential of the Indian aviation sector.”

In addition, aviation was among 15 industries in which foreign equity norms were eased in the year gone by.

Moreover, India’s passenger traffic demand grew at a stellar pace.

Official data from the Ministry of Civil Aviation showed that passengers carried by domestic airlines between January and November 2015 grew by 20.41 percent at 73,382,000.

Sector-based experts pointed out that low crude oil prices helped to bring down fares which supported the rise in passenger traffic.

“Aviation fuel makes up for 30 percent of the cost of running an airline, at record low levels, airfares have reduced which in turn has led to the increased passenger load that we see today,” Rajiv Chib, director for aerospace and defence with PwC, told IANS.

Besides fares, lower oil prices gave a jolt of fortune to the sector which till a year back was reeling under heavy losses on account of expensive jet fuel.

“Whenever fuel cost as a percentage of total cost falls near or below the 40 percent level, airlines start reporting profits. Further, oil price reduction leads to a tempering of the airfares which stimulates demand, thus increasing load factors of airlines,” Kuljit Singh, partner for infrastructure practice at EY, told IANS.

For the industry the year saw the dramatic turnaround of one of the country’s earliest budget carriers – SpiceJet – what with another having crashed towards bankruptcy led by industrialist Vijay Mallya.

The crashing budget airline was piloted back into a stable financial trajectory by one of its co-founders, Ajay Singh, who bought out the stake of erstwhile promoter Kalanithi Maran and KAL Airways earlier in the year.

Under his leadership the airline soon recovered lost ground, garnered fresh funding, posted three consecutive quarters of profit and is in the process to augment capacity.

The airline set new benchmarks in Indian aviation by achieving over 90 percent load factor (PLF) for seven consecutive months since May and reported the highest PLF amongst its peers for the last nine months.

“The biggest reason behind SpiceJet’s revival is the hands-on approach of the new owner-cum-CMD Ajay Singh. He understands the industry and the airline inside out,” Dubey elaborated.

“His presence brought in a lot of confidence to passengers, employees, lenders and suppliers.”

The company’s scrip price appreciated by 379 percent from Rs.13.9 on December 16, 2014, to Rs.66.55 on December 16, 2015.

Jet Airways too showed a marked recovery as the company recorded two consecutive profitable quarters after a gap of eight years.

But IndiGo was the one which landed with big bucks thanks to its grand initial public offer (IPO) during the just concluded year.

The company’s Rs.3,018 crore IPO became the biggest in nearly three years on the Indian exchanges and marked an over-subscription by 4.95 times.

“Listing of IndiGo is a great development for the industry as this will ultimately benefit airlines such as Spicejet, Go Air, to raise capital which they may urgently need to grow, to pay down debt and to consolidate their operations,” Singh said.

The financial turnaround did not stop with just private players, even Air India made headlines by announcing that it expects to post an operating profit of Rs.6 crore for the current fiscal.

“Lower fuel prices, aircraft availability, increased cabin manpower, aggressive marketing and promotions coupled with improved operational performance are the factors contributing to its growth,” Chib cited.

Nevertheless, the rainbow weather was disrupted with concerns over exceptionally high fares that even had Prime Minister Narendra Modi worried!

Other incidents, like the flip-flop over the status of a proposed new airport in the National Capital Region (NCR) showed a power tussle between the senior and junior minister, who run the show at the Rajiv Gandhi Bhavan which houses the civil aviation ministry.

But the real bolt from the blue came in from of the fair business practices regulator — the Competition Commission of India (CCI) which penalised Jet Airways, IndiGo and SpiceJet for indulging in anti-competitive practices.

Nonetheless, all three airlines that time said that they were considering challenging the order.

Highlights of 2015:

* Government comes out with a draft civil aviation policy

* Among many proposals is one to scrap the 5/20 norm

* Policy aims at pegging a minimum tariff for each flying-hour

* Policy on hold awaits cabinet’s approval

* Passenger traffic grows by 20.41 percent during January-November

* Sliding crude oil prices lowered fares and strengthened airlines balance sheets

* Dramatic turnaround of SpiceJet under industrialist Ajay Singh

* IndiGo’s Rs.3,018 crore IPO oversubscribed

* Air India hopeful of posting an operating profit of Rs.6 crore

* Flip-flop over the status of a proposed new airport near Delhi

* CCI penalises airlines for indulging in anti-competitive practices.

(This is a part of a series of articles from IANS that look back at the year that was for a variety of subjects, running up to the New Year. Rohit Vaid can be contacted at rohit.v@ians.in)

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