FDI is welcome in aviation,but first there must be a clean-up in the sector
The civil aviation sector in India has gone long past the point of being a growth story,but the declining numbers of air traffic passengers warn that the sector could face more troubled times. Since the global meltdown of 2008-09,the first five months of this fiscal threaten to be the first period that the number of air passengers in India will come down. The 6 per cent year-on-year drop looks more precipitous if one compares the data month-on-month. In a slowing economy,this is not surprising but the airline companies seem to have dug a larger hole for themselves as they had banked on an ambitious growth in passenger numbers. The immediate response of the aviation companies has been to raise fares and,wherever possible,cut back the number of seats on offer. But unless there is a turnaround in the economy in the next two quarters,these measures could further cripple the sector.
At the same time,the sector has run up against regulatory air pockets too. This week,Civil Aviation Minister Ajit Singh made the startling disclosure that a cabal of officials in the Airports Authority of India allegedly forged numbers in a tender file to award the contract for ground handling at five international airports to just one firm,raising questions about the extent of the regulatory oversight in this sector. Having publicly flagged the problem,the ministry must now undertake a thorough examination of the issue,it must go beyond the suspension of the concerned officers.
This is the backdrop against which the government has liberalised the foreign investment regime,allowing foreign airlines to pick up a 49 per cent stake in domestic airlines. But as airlines like Emirates and Etihad are showing,it may make more sense for them to fly under their own flag to more Indian cities. While Air India,for instance,has cut back on its services to connect only 62 Indian cities,the two airlines now already reach 21 destinations within India.