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Aviation Industry Faced Huge Losses In 2011

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The Indian aviation industry faced a paradoxical situation in 2011 suffering huge losses in the face of a burgeoning domestic air traffic, as it battled high fuel costs and fierce competition while looking up to the government for help.

As the country celebrated 100 years of aviation in India, the Civil Aviation Ministry got a full-time minister Ajit Singh, replacing Vayalar Ravi who held the portfolio as an additional charge, only in the year-end.

There were three major helicopter crashes during the year, all in the northeast including one that claimed the life of Arunachal Pradesh Chief Minister Dorjee Khandu.

The year also witnessed a major scam involving pilots who got licenses by submitting fake or forged documents. The scam, which raised serious questions about aviation safety, led to the arrest of 23 people, including pilots, staffers of DGCA and middlemen.

Air India operations were hit by a nine-day strike by its pilots in April-May over salary and allowance payments which disrupted its flight schedules.

Flights of Air India and Kingfisher were also disrupted for a few days during the year as oil PSUs stopped supplies demanding daily cash payments for lifting of jet fuel.

To have a strong aviation regulator, the government planned to bring a legislation to set up a Civil Aviation Authority with financial and administrative autonomy in line with such bodies in several countries, like the US and the UK.

A tough financial situation saw the intervention of Prime Minister Manmohan Singh. The government got into the act to find ways to aid the beleaguered industry, with major airlines suffering enormous accumulated losses of nearly Rs 15,000 crore in 2010-11, up from Rs 7,038 crore in 2009-10.

The only carrier to post profit in the tough times was no-frill IndiGo, which also placed what is touted to be the 'largest' aircraft order in aviation history for 180 A-320s worth USD 15.6 billion from European manufacturer Airbus.

Air India suffered a loss of Rs 6,994 crore this year, while Kingfisher posted a Rs 1,027 crore loss and a mounting debt of Rs 7,057.08 crore.

Aviation consultancy firm Centre for Asia Pacific Aviation estimated that Indian carriers were set to post a record combined loss of USD 2.5 billion this financial year.

With large airlines like Air India and Kingfisher accounting for a major quantum of the industry losses, a Group of Ministers and panel of officers held several meetings to finalise a long-term capital infusion package for Air India.

The national carrier decided to sell and leaseback seven of the 27 Boeing 787 Dreamliners, scheduled for delivery till June next year.

The government, which had frozen the bank accounts of Kingfisher and Air India, de-freezed them early this month after they made part-payment of their service tax dues.

Kingfisher worked out deals with its lenders, including state-run banks, to lower its interest burden, as its promoter Vijay Mallya lobbied hard with the government to allow foreign airlines to pick up stake in Indian carriers. However, a final decision is yet to be taken on the matter.

In a bid to consolidate their position, Indian carriers undertook several steps to cut costs and rationalise their networks to match demand for air travel.

While Jet Airways decided to move ahead with plans to have a single no-frill banner instead of running both JetLite and JetKonnect, Kingfisher on the other hand decided to do away with its low-fare segment, Kingfisher Red, and continue with its full-service brand.

High taxes on jet fuel and equally high airport charges were the major cost heads for the Indian carriers, with the global airlines' body IATA estimating that fuel costs accounted for 45 per cent of the total costs, compared with 30 per cent for global carriers.

The International Air Transport Association (IATA) asked the government to set the country's aviation industry free from policy interventions like checking airfares and slash taxes, especially on jet fuel.

Instead of "micro-managing" the cash-strapped sector, the government should concentrate on building infrastructure and the air navigation system, IATA chief Tony Tyler said.

In India, he said the aviation industry contributed five per cent of GDP, around Rs 291 crore in taxes, provided four million jobs and another seven million jobs through tourism and related activities and hoped "these numbers will have a good impact on government policies."

Aviation experts projected that though air traffic would continue to grow strongly, financial recovery of the airline industry would be slow.

In a major initiative, India took the lead in attacking the European Union's decision to impose a hefty anti-emission tax on all flights, with the adoption of Delhi Declaration at a crucial meeting of the International Civil Aviation Organization Council and non-EU Member States, including US.

The government also signed a Bilateral Aviation Safety Agreement with the US to allow mutual acceptance of aeronautical products and parts developed in either country.

It would provide international acceptance to products designed and manufactured in India.


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