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Aviation Strategy: Filling a Crucial Void

Indian aviation needs to be "democratised", which requires moving from an elitist to a "mass transit" mode, for which cost-effectiveness is an imperative. Such a "democratisation" or mass transit strategy can best be implemented by benchmarking with China.

Aviation Strategy:Filling a Crucial Void

Indian aviation needs to be “democratised”, which requires moving from an elitist to a “mass transit” mode, for which cost-effectiveness is an imperative. Such a “democratisation” or mass transit strategy can best be implemented by benchmarking with China.


n recent years, the air has been thick with developments on the civil aviation front. Ostensibly, Indian civil aviation is on a long overdue growth trajectory. However, if one tries to discern the underlying purpose of the flurry of decision-making or, more typically, the announcement of a plethora of preliminary ideas, he/she would be hard pressed to arrive at a commonly held, long-term goal statement for the country. This represents a crucial void. Aviation strategy may well be hyperactive. But if it is missionless and more about make-believe, then it may be more problematic than necessary.

Somehow, it seems intriguingly geared to divert public attention from intractable structural choices such as between military and civilian use of air space and airports. The present plan of the cabinet to formulate an aviation policy, rechristened recently as “Vision 2020”, may be an attempt to introduce a desirable element of packaging for public consumption. However, the referral of this document to a group of ministers (GoM), headed by a previous defence minister, does not bode well for a satisfactory resolution of the key structural issues. It is feared that the required “level playing-field” for aviation policy in the domestic arena may not materialise very soon.

Consider the challenge facing the government. The estimated compound annual growth rate (CAGR) of passenger traffic to be planned for, in the aggregate, would be conservatively of the order of 15 per cent (roughly twice the GDP growth rate) and, perhaps, even more if the stimulating effect of low fares is considered. This means a doubling of passenger traffic in about five years. At this rate, by 2020, the nominal end point of the new Vision, there would be a whopping sixfold increase in passenger traffic. Is Indian aviation really and truly geared for such rapid growth rates? There is enough “demand pull” here to keep the government powering ahead at full throttle for a fairly long time in a herculean effort to catalyse a commensurate supply side response in infrastructure.

Strategic Void

Why is lack of an explicit aviation strategy a problem? In the absence of an overarching superordinate goal that is widely shared, the concerted and sustained efforts of the assorted players involved in this complex, time-, space- and capitalintensive sector may not be forthcoming and actions on the ground and over time may be at cross purposes. Instead of effecting the desired paradigm shift in civil aviation, we would end up with a dubious non-strategic drift. The element of public accountability vis-a-vis the future direction of the sector would easily be smothered by a smokescreen of ambiguous hype. There is an urgent need for a widely recognised touchstone against which the emerging array of individual ideas/decisions can be reasonably assessed. It is time to take serious stock and carry out the required midcourse correction. What follows is one option.

The framework of global competition provides a useful starting point. In this era of globalisation, global competition is a reality, whether by design or by default, especially in a vast and dynamic industry like aviation. Two facets of global competition can be distinguished for aviation purposes. One is the conventional mode of competition with foreign airlines which often makes headlines. The other is the more subtle one of matching/replicating those ecosystems which constitute international benchmarks in aviation. Our focus here is on the latter, which may be referred to as benchmarking.

This, however, calls for shedding a tendency to engage in denial via the usual excuse of the uniqueness of the Indian scenario, which provides a convenient cover for business-as-usual instead of stimulating a breakthrough effort. Global benchmarking might help to elicit the longterm commitment and resources required by a range of players. It would also facilitate public accountability, at least as to the direction taken and perceived deviations from it. Can we identify a global standard against which the net result of our recent achievements could be measured objectively and continuously?

In Mass Transit Mode

China may provide an answer. It is surprising to find that India has a (perhaps transient) lead over China in one specific area of civil aviation, viz, low-fare domestic air travel. China is, of course, way ahead in total numbers of airline passengers by as much as 5:1. But low-fare aviation there is practically unheard of, unlike in India where an estimated 70 per cent of the total travel is on low airfares. Parenthetically, the situation is similar in IT where India is ahead, specifically, in software services, even though China leads in IT overall (i e, including hardware manufacture). Similarly in telecom, China is now a world leader but India reportedly has an edge in unit costs/charges of mobile telephony. Hence, it is not unrealistic to leverage India’s lead over China in low-cost aviation.

From the little that is known about China’s low-cost carriers, it appears that the government there is generally against fare-based competition. Chinese aviation is, for all practical purposes, state-controlled, and meaningful airline de-regulation has still to appear on the scene. Indeed 80 per cent of China’s airspace is controlled by the military (50 per cent in India). Besides, cost structures are similar to India’s, i e, high fuel costs, high landing charges and high taxes. Labour costs are supposedly low but it is not known if India has much of an edge in this respect, given the staff shortages faced here and the significant reliance on highly paid expatriate pilots and executives.

Benchmarking with China in civil aviation can be driven by the idea of “democratisation” (the political overtones being intentional). Essentially, by “democratisation” we mean the transition of air travel from an elitist to a more “mass transit” mode. Low-cost aviation in India may, at present, be a bit of a joke in some circles. One noted humorist has recently called it India’s “air farce”. A low-cost carrier was even immobilised for several

Economic and Political Weekly August 4, 2007 hours at an airport by all its passengers (perhaps a first in world aviation) who complained about lack of basic comforts including, air conditioning in the cabin. Thankfully, there has been no catastrophic accident so far to bring things to a grinding halt (though technical snags during landing and near misses in the air have increased noticeably of late). But as things look, a tragedy in civil aviation, however unwelcome, may be very much on the cards unless remedial measures are soon taken across the board even as heavy industry losses are expected to continue for the second straight year in a clear sign of sickness amidst phenomenal growth.

A concerted effort has to be made to correct glaring weaknesses in policy and practice and to convert the present ephemeral international lead in civil aviation into a durable low-cost aviation regime in order to maintain the edge over China for the foreseeable future. The lead-time is estimated at about five to seven years as the civil aviation administration of China decided last year to open the domestic flight operation rights in 2010 and offer more freedom for airline companies.

As a bonus, a focus on cost-effective civil aviation may have a catalytic effect on the entire civil aviation scenario in the country. With a comparative cost advantage in civil aviation, India could launch a credible bid for a significant lead in this industry. Ultimately, a thriving aviation industry could even boost the overall economy. This requires an integrated view of an aviation-centric economy, i e, its forward and backward linkages. “Democratisation” need not be synonymous with a mechanical formula or ritualistic mantra. It is also much more than passing off a couple of so-called “aerotropolises” as the sine qua non of national progress. They are relatively small oases of excellence in the total Indian aviation picture.

Nearly 10 years ago, a civil aviation minister had declared the aim of “democratising Indian civil aviation” taking his cue from low-cost carriers in the US where the idea had been established over three previous decades. The present incumbent has, himself, been an astute observer of this vision from close quarters in Parliament at the time. Given the elapsed time of about four decades, India may have been repeatedly missing the “democratisation” (mass transit) bus in aviation. Now that some headway has been made against the odds, it is time to revive the slogan in a non-partisan political manner and make some serious efforts to realise it in a systematic bid to stay ahead of China.

Content of Mass Transit Strategy

Note that, conceptually, the demand for instantaneous travel between two popular destinations is infinite as the marginal cost approaches zero. Hence “democratisation” envisages a determined fight, a full court press, to keep industry-wide costs down and to maintain low fares. The primary focus would have to be on “policy” costs like assorted taxes, cesses and surcharges, direct and indirect, usually levied in kneejerk fashion by government entities for revenue generation purposes, which only result in higher passenger fares. Increases in airport charges due to monopoly conditions would also have to be resisted if they are not commensurate with services provided and inconsistent with global benchmarks. At the same time, a close watch has to be kept to ensure that essential costs like aircraft maintenance and airport security are not pared to the bone due to any desperate financial straits of the concerned entities. Meanwhile air traffic control has to be single-mindedly streamlined to minimise total travel and overhead circling times for both international as well as domestic flights and thus conserve costly fuel and compress unit capital costs.

Special attention has to be paid to determine the aircraft and passenger handling capacity of airports. This capacity has then to be steadily enhanced in passenger-friendly and cost-effective ways. It includes ensuring the efficacy of coordinated ground transportation for the common man to and from airports, both old and new. Multi-airport systems in and around the top few metros are an indispensible ingredient in the development of low-cost aviation. Wasteful and regressive closure of vital installations due to vested interests goes completely against the grain of boosting airport capacity, which is the national need of the hour. Any multiairport systems that emerge have to be managed (regulated) for the long haul and not allowed to cannibalise each other in the short run in the name of competition.

In creating multi-airport systems, the government has to curb its insatiable appetite for revenues at the bidding stage itself by refraining from allowing an eventually counterproductive game of “winning at all costs”. The airport regulator has to inculcate, firmly and fairly, a spirit of cooperation in the national interest without pandering to forces of cartelisation. The cockpit dials of policy that have to be monitored include CAGRs of aircraft movements and passenger traffic, absolute levels of all traffic, unevenness of traffic patterns (which requires smoothing as much as possible), increased employment (both direct and indirect), foreign direct investment, the replication of an effective and efficient aviation ecosystem from end to end in the country, the speeding up of general economic activity in the land, growth of tourism (domestic and international), etc. In keeping with the dynamism of the industry, disruptions at all levels have to be viewed seriously and their root causes have to be addressed systematically, durably and, to the extent possible, proactively.


The power of the “democratisation” lens can be seen in clustering the following isolated “schemes” in Vision 2020. Multiairport systems have to be encouraged by adjusting archaic airport separation rules (for safety) as well as the associated security parameters. This would facilitate the emergence of hubs at secondary airports in the metros. If merchant airports proliferate at even half the rate at which China rolls out airports, then regional airlines would take-off without clogging existing congested metro hub facilities. But preventing civil enclaves from closing down in the first place (in order to expedite multi-airport systems) is, however, decidedly more difficult, given prevailing institutional rigidities, a process ascribed, ironically, to “democracy”!

Clearly, the minor blizzard of activity which passes for Indian aviation strategy these days has to be focused and directed in a coordinated long-term movement for meaningful results. But instead of being “full of sound and fury, signifying nothing”, it should facilitate the “democratisation of Indian civil aviation”, that too, substantively rather than superficially. In this way the current slender lead over China could be continuously maintained. If one thinks of it, China would have to adopt the very same approach (of mass transit air travel) if it is to get ahead of India (or any other country) in low-cost airlines. Hence, subject to the incipient ecological factor whose profile is rising lately, democratisation may qualify as a default setting for aviation strategy almost anywhere.



Economic and Political Weekly August 4, 2007

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