Weekly Analysis

An in-depth analysis of the best and most relevant editorials of the week from the best dailies known for civil services preparation.

RSTV – THE BIG PICTURE ANALYSIS: Aviation Flying for All

The Editorial covers GS paper 2

  • Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

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Introduction

  • On a high growth trajectory, the global aviation industry is ushering in an era of rapid expansion. 
  • The International Civil Aviation Organization has predicted a 100 percent increase in global air travel by the year 2030, creating a need for extensive efforts to bring the entire aviation ecosystem to pace. 

What are the highlights of the summit?

  • To ride the strong tailwinds and pave the way forward for the sector, the Ministry of Civil Aviation, Government of India, in collaboration with FICCI is organizing first of its kind Global Aviation Summit with a theme “Flying for all - especially the next 6 Billion” on 15-16 January, 2019 in Mumbai, the financial capital of India.
  • Determining the growing demand for air travel especially in emerging economies, the Summit aims to provide a platform to the stakeholders to brainstorm over the future of aviation industry and identify the growth areas. 
  • The Summit also offers the stakeholders an opportunity to explore, deliberate and understand how technology-driven innovations will change air travel in the decades to come.
  • The event will host experts and CEOs from Global Aviation Fraternity emphasizing upon the latest trends, futuristic aircraft and cutting-edge technologies. 
  • It also gives the opportunity to highlight latest concepts like drones, air taxis, volocopters, new jets and ultra-light aerial electric vehicles etc. 
  • It will also entail discussions on airports of future, innovations, safety & security, financing & leasing, sustainability and growth drivers - cargo, logistics.

What are the key statistics?

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  • India is the seventh-largest country by area and the second-most populous with over 1.35 billion people.
  • It is one of the fastest growing economies of the world and is likely to become the 5fth largest in 2019.
  • Total passenger traffic to, from and within India, during Apr-Nov 2018 grew by around 15% year on year as compared to around 6% globally.
  • India is now the seventh largest aviation market with 187 million passengers in FY 2017-18 and is expected to become the third largest by 2022.
  • India’s air passenger traffic is expected to grow six-fold to 1.1 billion and the number of operational airports increase to around 200 in 2040, according to Ministry of Civil Aviation’s vision document released. 

Why is India considered as emerging “aviation power”?

  • The Indian aviation sector is the fastest growing in the world with a growth rate of 20 per cent a year. 
  • A task force has been set up, under National Civil Aircraft Development (NCAD) programme, to chalk out plan for indigenous aircraft, helicopters and associated equipment manufacturing. 
  • With an aim to promote India as a global aircraft manufacturing hub, the task force is expected to set up a special purpose vehicle (SPV) with an investment of $ 1.4 billion.But despite this 20 per cent growth, we have only 3-3.5 per cent of population flying, signifying great potential to grow further.
  • To achieve the target, the task force will identify technologies where India can pioneer in, giving SEZ status to aero-clusters, allowing 100 percent foreign direct investment (FDI), through automatic route, for investments by OEMs and Tier 1 manufacturers in defence aeronautical manufacturing, skill development, etc.
  • With the right policies and a relentless focus on execution, India can surprise the world by not just meeting but exceeding the Vision 2040 targets. As per the document initiatives like Nabh Nirman (for airport capacity augmentation), Digi Yatra (for paperless travel) and AirSewa (for online passenger grievance redressal) are bringing in radical changes.
  • While India is a “price sensitive” market, gradual rise in per capita incomes, increased (perceived) value of ‘time’, propensity for leisure and tourism will lead to more and more Indians using airways as a medium to travel.

What are the challenges in Indian Aviation sector?

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  • Oil for the airline industry is an important variable cost. As the price for oil has shot up, it had led to difficulties for airlines as they have not been able to absorb in the short term due to their business model.
  • The suffering for the sector is not a new one altogether. Over time, checks and balances should have been built in the system to absorb price shocks. The sector is confused as a whole on whether they want more volume or should they concentrate on a feasible plan that will help them keep their house in order.
  • India’s airlines have been trying so hard to capture market share that they’ve lost focus on making money. Indian aviation companies have been unable to value sustainability over volumes.
  • No airlines company has been able to devise a credible currency policy to protect them against sharp currency movements. 

What are the Way forward?

  • Become a huge provider of trained manpower for aviation in terms of engineers and pilots and even cabin crew as we Indians have a traditional service mentality
  • Become a huge exporter of services as well, in terms of maintenance, repairs, and overhauls (MRO) services and other things
  • Usher in amendments to Land Acquisition, Rehabilitation and Restructuring Act, 2013 and adopt “land-pooling” techniques to develop newer airports.
  • Levy a lower Goods and Services Tax (GST) reasoning that “taxes add pressure on the airline’s bottom line”, thus aviation turbine fuel (ATF) needs to be brought under GST “at the earliest”.
  • Airlines must try to reduce dependence on ATF by adopting biofuels and explore issuing masala bonds to raise funds for themselves.
  • The air cargo will reach 17 million MT per annum by 2040, up from 3.35 million MT per annum in 2018. 
  • This will need setting up of Air Cargo Logistics Promotion Board (ACLPB) to enable time-bound implementation of policies, establishing free trade warehousing facilities at the airports, setting up Air Freight Station (AFS) and putting in place Risk Management System (RMS) to minimise congestion. 
  • There is a need for development of low frill cargo airports and augmentation of tier II/III airports to avoid congestion at metro airports.

Conclusion

The industry stakeholders should engage and collaborate with policy makers to implement efficient and rational decisions that would boost India’s civil aviation industry. With the right policies and relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third-largest aviation market by 2025.