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Thursday, 25 April, 2019, 11 : 41 AM [IST]

Evaluating contingencies in Indian aviation

Triggered by the reforms that started almost 2 decades back, India’s civil aviation sector is ready to become one of the largest in the world. While the opportunities are immense, the vulnerability of our skies has also grown manifolds. The government needs to come up with a comprehensive policy for the civil aviation sector which not only ensures that Indian aviation companies are able to become world leaders, but also that they are able to offer safe and convenient travel to customers at competitive prices.

While the domestic demand for air travel has increased considerably in the last few years, the government has done little to actually help it achieve its true potential. The government has not reduced the jet fuel prices in proportion to the fall in international crude oil prices. Services provided at all Indian airports except the major ones continue to be far below the global standards. The airport connectivity with the cities is extremely limited

Today, India has the fastest growing domestic aviation market in the world, as per the International Air Transport Association (IATA). India’s domestic air passenger demand has grown 28% as compared to the previous year. This growth is three times as compared to China’s (10.9%) growth and five times as compared to United States’ (5.9%) growth during the same period.

Key challenges:
1. Shortage of trained employees: There is a shortage of trained and skilled manpower in the aviation sector as a result of which there is cut-throat competition for employees which, in turn, is driving wages to unsustainable levels. Moreover, the industry is unable to retain talent.

2. Regional connectivity: To provide regional connectivity is one of the biggest challenges facing the aviation sector in India. The lack of airports is hampering the growth of regional connectivity.

3.Rising fuel prices: As fuel prices have surged, the inverse relationship between fuel prices and airline stock prices has been established. Moreover, it also led to increase in the airfares.

4.Declining yields: As more players are attracted towards the aviation industry because of increasing growth prospects it will lead to more competition. All this has resulted in lower returns for operators.

5. Gaps in infrastructure: Airport and air traffic control (ATC) infrastructure is insufficient to support growth. While an initiative has been made to upgrade infrastructure, the results will be visible only after some years

6. High input costs: The input costs are also very high because of some of the reasons like withholding tax on interest repayments on foreign currency loans for aircraft acquisition. Increasing manpower costs due to shortage of technical personnel.

7. No input from travel industry: Inputs from associations as working committees is definitely needed which is never taken into consideration.

Comparing to strengths and weakness of the airline industry, India has growing tourism, rising income levels, liberal environment, and economic growth. Our greatest weakness is under-penetrated market, infrastructure constraints, airport infrastructure, high cost structure and skilled resources. The most important being communication with the travel industry and not just the operators.

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