Aviation

• Start-ups in Indian aviation industry at present include – Air Kerala, Fly hornbill and Star Air.

• Its significance lies in:
  ➙ Its deep interlinkages with other sectors of economy
  ➙ Provision of meaningful employment to a wide range of skilled labor including pilots, air and ground staff and others.
  ➙ Reduction in transport and communication costs.
  ➙ Unification of people and markets.

• Nationalization of Airlines –
  ➙ The step was taken as most private domestic airlines in independent India were making heavy losses.
  ➙ In 1953 Air-India International (Air-India from 1962) became a public sector corporation along with Indian Airlines Corporation (catering to domestic and regional routes).
  ➙ The Indian Airlines Corporation was formed by merging 8 private airways.
  The fleet consisted of 73 DC-3 Dakotas, 12 Vikings, 3 DC-4s and some other smaller aircrafts.

​

Indian Aviation Today: Infrastructure​

• India is the third largest domestic aviation market in the world and is expected to overtake UK to become the third largest air passenger (domestic and international) market by 2024.

• The WEF’s Global Competitiveness Report, 2018 ranked India 53rd out of 140 countries in air transport infrastructure.

• It has 464 airports and airstrips, of which 137 airports are managed by AAI. It has control over 24 international airports, 10 custom airports and 103 domestic airports. India has envisaged to increasing the total number of airports to 190-200 by 2040.

• Rising demand in the sector has pushed the number of operational airplanes. In 2016, the demand for domestic air travel in India was twice than in China. The number of airplanes is expected to reach 1,100 planes by 2027. India will need 2,380 new commercial airplanes by 2038.

• The Indian aviation market is on a high growth path. The aircraft movement, passenger traffic and freight traffic increased by 4.9%, 4.5% and 3.1% respectively in February 2019 from February 2018, across all Indian airports taken together.

• Assessment:
  ➛ While the growth rate in aviation is high, the demand is higher. Moreover, it is still considered expensive for a majority of its population. There is therefore a large untapped potential for growth.
  ➛ A collaborative approach between industry stakeholders and policy makers is essential to India becoming a world leader in the aviation sector.

International Collaboration for Civil Aviation

• India is a member of the International Civil Aviation Organization (ICAO) – a UN specialized agency to regulate standards and procedures for peaceful global air navigation.

• India has also signed a number of international conventions relating to regulations and safety of civil aviation.

• It has also signed several bilateral air service agreements, including open skies agreements with Czech Republic, Finland, Guyana, Jamaica, Spain, Sri Lanka and Greece as part of the liberalization process under the new Civil Aviation Policy, 2016.

​

Legislative and Regulatory Framework

• The primary governing legislation for aviation in India is the Aircraft Act, 1934 which empowers the central government to make rules to regulate the manufacture, sale, use, operation, export, import and safety of all civil aircraft.

• The Aircraft Rules, 1937 generally apply to Indian-registered aircraft (and to persons thereon), wherever they may be (with certain exceptions), and all aircrafts present in or over India. In case of foreign registration of aircraft, the standards established by the Chicago Convention are implemented.

• Other related legislations:
  ✔ Airports Authority of India Act, 1994
  ✔ Airports Economic Regulatory Authority of India Act, 2008
  ✔ Carriage by Air Act, 1972
  ✔ Aircraft (Security) Rules, 2011
  ✔ Aircraft (Investigation of Accidents and Incidents) Rules, 2012

• The Ministry of Civil Aviation administers the relevant legislation and formulates national policies and programmes related to the aviation. It also exercises administrative control over the regulatory bodies: Directorate General of Civil Aviation (DGCA), Bureau of Civil Aviation Security (BCAS), and the Airports Authority of India (AAI).
  The AAI was constituted in 1995 by an Act of Parliament which merged erstwhile National Airports Authority and International Airports Authority of India.

• Naresh Chandra Committee was set up to into the challenges faced by the aviation sector in the country. It presented its report in 2003 and recommended:
  ➜ Liberalization of Foreign Direct Investment (FDI)
  ➜ Phased liberalization of the international air transport segment
  ➜ Privatization of the national carriers – Indian Airlines and Air India – along with the airports in India.
  ➜ Reduction in Airport Charges

• In July 2020, GoI notified changes in Foreign Direct Investment (FDI) norms in civil aviation through the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2020.
  ➜ 100% FDI is permitted under automatic route for NRIs in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline.
  ➜ 100% FDI under automatic route is also permitted in helicopter services/seaplane services requiring Directorate General of Civil Aviation (DGCA) approval.
  ➜ FDI up to 49% is allowed under automatic route in scheduled air transport service, regional air transport service and domestic scheduled passenger airline.

• RCS-UDAN (Regional Connectivity Scheme – Ude Desh Ka Aam Naagrik) is a part of the National Civil Aviation Policy (NCAP) and is funded jointly by the GoI and the state governments.
  ➜ It aims to increase infrastructure and capacity of the aviation sector.
  ➜ It is used to boost inclusive economic development by enhancing availability and affordability of regional air connectivity and revive/upgrade 56 unserved airports and 31 unserved helipads.
  ➜ Apart from the central and state governments, Airport operators such as AAI will also provide concessions in various charges.

​

Aircraft (Amendment) Act, 2020

• The Act amends Aircraft Act, 1934. It was passed by the Lok Sabha in March 2020, and by the Rajya Sabha in September 2020.

• It converts the three aviation regulatory bodies under the Ministry of Civil Aviation (MoCA) – DGCA, the BCAS, and the AAIB (Aircraft Accidents Investigation Bureau) – into statutory bodies to be headed by Director General appointed by the Centre. The central government can issue directions to these bodies with respect to their activities in public interest.
  The DGCA will have safety oversight and regulatory functions as mentioned in the Bill. BCAS will carry out regulatory activities related to civil aviation security. AAIB will look into investigative activities for aircraft accidents.

• The central government may cancel the licences, certificates, or approvals granted to a person under the Act if the person contravenes any provision of the Act.

• The legislation also provides for keeping defence aircraft outside the purview of Aircraft Act, 1934 and increases the penalties for violations from current Rs. 10 lakh to Rs. 1 crore.
  The various offences include: carrying arms, explosives, or other dangerous goods aboard aircraft; contravening any rules notified under the Act; and constructing building or structures within the specified radius around an aerodrome reference point.
  The Act provides for the appointment of designated officers, not below the rank of Deputy Secretary to adjudicate penalties under the Bill. Appeals against decisions and orders must be filed by the aggrieved person within 30 days from date of the order.

​

Challenges faced by Civil Aviation Sector

• Commercial liberalization in the sector has led to intense competition and reduction in real yields or profits.

• There is a shortage of trained and skilled personnel. The industry is also unable to retain talented employees.

• Regional connectivity has not been achieved due to infrastructural gaps in airports as well as air traffic control.

• The aviation market is very expensive investment – input costs of aircraft acquisition are high, so are interest repayments on foreign currency loans. High cost of jet fuel also makes it an expensive undertaking.

• Due to rapid expansion in the sector, infrastructure and capacity have become important concerns which can decrease efficiency and safety.

• While demand has increased, air travel continues to remain expensive and inaccessible to a vast majority of the population due to the tariff determination structure.

• Aviation safety also remains an important concern.

​

Aviation Reforms​

• These were undertaken as part of Aatmanirbhar Bharat and include various components including reforms regarding flying cost, public private partnership, maintenance, repair and overhaul.

• Flying Cost will be reduced by Rs. 1000 crore through efficient airspace management.
  More air space will be opened up for utilization so as to reduce travel time and fuel usage. At present, only 60 per cent of Indian airspace is freely available.
  Restrictions on utilization of air space will be relaxed to ensure higher civilian flying efficiency.
  The changes will also ensure a positive environmental impact.

• Infrastructure development in the aviation sector will be done through Public-Private Partnership (PPP) Model to create more world-class airports.

• India is set to become an important international hub for Maintenance, Repair and Overhaul (MRO) facilities through:
  Rationalization of the MRO Tax Regime.
  Convergence between defence sector and the civil MROs to create economies of scale.
  Setting up of engine manufacture units by world-renown manufacturers.
  Increasing aircraft component repairs and airframe maintenance from Rs. 800 crore to Rs. 2000 crore in three years.
  Reduction in maintenance cost for airlines.

​

Case Study: Air India​

• Timeline of important events:
  Air-India Ltd was created for providing domestic flights in 1946.
  Air-India International (49% - government ownership; 25% - Tata) came into existence in 1948.
  In 2007, Air India and Indian Airlines were merged to form the National Aviation Co. of India.
  A bailout package, lasting 10 years was introduced by UPA government in 2012.
  In 2018, the corporation was opened for disinvestment (76% for Air India; 100% for Air India Express; 50% for Air India SATS).

• What went wrong?
  While Air India was already incurring losses and debt since early 2007, the massive fleet acquisition in 2010 made the situation a lot worse. As of March 31, 2019, Air India had a total debt of Rs 58,283 crore. Its accumulated losses for the past decade stood at Rs 69,575 crore.
  Other factors include: less income in passenger revenue; low monetization of assets; non-availability of proper aircrafts; mismanagement in granting bilateral agreements with foreign countries; loss making international operations; and mismanagement of manpower.
  The high value of debt has led to a lack of interest in buying the airlines despite several announcements to place bids. At present, buyers have been asked to place their bids by end of October 2020.
  Retention of government control and an inefficient work culture has also contributed to Air India’s woes.

• Steps taken by the Government:
  Apart from the bailout package, Air India Asset Holding Ltd – a special purpose vehicle – was created for financial restructuring. Of the total debt, about Rs 29,000 crore will be transferred here.
  Even though the government has decided to reduce the debt burden on the buyer, its value remains high at Rs. 23,286 crore.
  Plans for disinvestment have not yielded results due to lack of buyer interest.

• The Way Ahead:
  Privatization of Air India – the government has decided to completely let go of Air India, as opposed to the earlier offer of selling only 76% stakes.
  Selling some of Air India’s assets to pay back a portion of the debt and renegotiating loans. Alternatively, taking loans against the assets can also be undertaken.
  Fragmented sale of Air India’s assets.
  The buyer also holds the option of using Air India’s accumulated losses to offset tax payments in the future to reduce effective debt burden.

​

Aviation during the Corona Pandemic​

• The aviation industry, like several other sectors, is facing a crisis in the wake of the COVID-19 pandemic.

• Important challenges include: travel restrictions, grounded fleets, benched staff, schedule uncertainties, ticket liabilities and cash burn.

• Aviation industry’s revenues are expected to decline by a projected $252 billion in 2020. This translates into an approximate net loss of $39 billion in the second quarter. The industry will also burn about $61 billion in money in the second quarter.

• Important losers: full-service network carriers, and regional and secondary airports.

• Short-term winners: regional airlines, during the recovery period.

​

Recommendations and Way Forward

• Infrastructural Advancements:
  ➜ Planned airports under the UDAN scheme should be completed in a time-bound manner.
  ➜ Infrastructure in existing airports should be augmented.
  ➜ MRO services should be focused on and developed in a timely fashion.
  ➜ Focus on domestic hub development.

• Investment opportunities in the aviation sector should be increased through infrastructure and financial support. Monetization of vacant real estate near AAI airports should be undertaken.

• Skilled manpower
  ➜ Latest concepts in aviation industry should be taught through collaboration with collaboration between original equipment manufacturers (OEMs), industry and educational institutes.
  ➜ Training should also be made more affordable by reducing GST rates on Avgas.
  ➜ Formulation of long-term plans for advanced research in aviation technologies should be undertaken to create a manufacturing ecosystem.

• Air Cargo growth should be promoted through creation of transshipment hubs and an e-cargo gateway based on the National Air Cargo Community System (NACCS) platform.
  Using the internet for providing related services will enhance efficiency and reduce delays.

• Regulatory frameworks dealing with tariff determination, fuel prices (ATF), and commercial usage of land with airports should be relaxed. DGCA’s efforts should be supplemented by a robust judicial review process to ensure effectiveness.

• Aviation safety should be a priority with a focus on pre-empting and preventing accidents and ensuring strict adherence to safety regulations.

• The industry stakeholders should engage and collaborate with policy makers to implement efficient and rational decisions that would boost India’s civil aviation industry.

Thing To Note: Bio-Jet Fuel​

• Event: The Indian Air Force’s An-32 aircraft using a 10% blend of Indian biojet fuel in both its engines took off from Leh’s Kushok Bakula Rimpoche airport on January 31, 2020.

• Definition: The fuel is made from Jatropha oil sourced from Chattisgarh Biodiesel Development Authority (CBDA) and then processed at CSIR-IIP, Dehradun.

• Benefits:
  ➜ Using such innovations will bring down carbon emissions and lower the nation’s oil import bill.
  ➜ Conducting the test flight in the Leh terrain provided major insight into the operational utility of bio-jet fuel.
  ➜ Indigenous technology.

• Challenges and conclusion: Although the feedstock price and availability and energy intensity of the process are significant barriers, biomass-derived jet fuel has the potential to replace a significant portion of conventional jet fuel required to meet commercial and military demand.