Business - India;The grounding of dreams

Arvind Singhal

In the midst of growing bad news on just about every front, one that is amongst the most frustrating is the turbulence affecting the Indian aviation sector. While the drama that was played out by Jet Airways — till now one of the most respected players in this rapidly growing industry — was totally inexplicable, it must force all those who have anything to do with civil aviation — those who could dream and fly for the first time in their lives, the frequent business and leisure travelers, the hundreds of thousands who have found direct and indirect employment thanks to the many new-generation airlines and the support-services businesses that have sprung up because of these start-ups, and the visionless self-serving politicians and bureaucrats who have stifled the growth of the entire civil aviation sector for most of the period since India’s independence — sit up and take notice.

For decades, India’s civil aviation ministry has effectively been the ministry of Indian Airlines and Air India. Since the nationalisation of civil aviation in 1953, these national carriers were mollycoddled and protected from any semblance of competition so that politicians and bureaucrats could use (and misuse) these airlines as their own private fiefdoms with complimentary travel passes including some for lifelong, unrestricted upgrades for family and friends, and companion schemes that allowed bureaucrats to cart their spouses and other progeny on official trips outside India even when the load factors were high enough to justify charging premiums for premium seats.

Privatisation of the two national carriers was anathema (and it still remains so) even when the government had little resources to invest in their expansion, leading to the bulk of the international traffic being cornered by foreign carriers who had a field day in building market share and exceptional revenues and profits on major routes such as those to Europe, the US and the Gulf.

When the sector was opened up at the start of the 1990s, it was done with absurd constraints such as no foreign investment, no international operations and compulsory flying on unviable (low) load factor routes. It was little surprise that many start-ups including Modiluft, Damania and East West folded up in the first few years. It was due to the extraordinary vision and unflinching tenacity of Naresh Goyal that saw Jet Airways not only survive but steadily grow to become India’s largest domestic airline. As just about any frequently-travelled Indian would vouch for, Jet set exceptional standards of quality and performance that could easily match the best in the world. Impossible it may have been to imagine, Vijay Mallya’s Kingfisher then raised the bar even higher almost from the very first day of its launch in May 2005. Captain Gopinath, through Air Deccan’s launch in 2003, made low-cost air travel a dream come true for millions of Indians who till then could not even imagine coming close to a real aircraft in their lives. Indigo and Spice Jet now continue to set standards of excellence in the genre of low-cost carriers.

With an industry that has such exceptional vision, entrepreneurship, boldness, commitment to excellence, outstanding business execution and management skills, and customer orientation that goes beyond mere lip-service, how have things come to such a pass that it is perilously close to being grounded for good? Yes, the very high oil prices certainly have a big role to play in the splash of red ink all over the balance sheets. It is also true that in the quest to gain market share, business prudence was sacrificed by way of very rapid buildup of capacity, expansion of network and lower-than-needed pricing, especially by budget airlines. However, the real culpability must rest with the total lack of vision of Indian politicians and the obduracy of the Indian bureaucracy.

Only Indian politicians and bureaucrats can come up with an investment policy that permits foreign investment in Indian carriers from any source but another airline! Only they can conjure a situation where most international carriers can start operations in India but an outstanding Indian carrier like Jet or Kingfisher — despite having demonstrated their capability well beyond that of Air India in just about every aspect — having to wait for five years. Even when these carriers are permitted now, the most lucrative routes such as Dubai are out of bounds for them enabling Emirates to offer 132 flights a week (to go up to 163 by February 2009) including 35 flights a week from Mumbai. Only politicians and bureaucrats can subsidise kerosene, LPG and diesel (and to some extent, petrol) to the tune of Rs 95,000 crore through oil bonds, while keeping the ATF prices higher by over 60 per cent compared to international prices. Add to this the extortionate landing charges by the AAI, and the picture of misery is complete.

Having experienced the affordability, convenience and joy (in most instances) of flying in India and flying overseas with Indian carriers like Jet, it will be criminal if the government lets this sector become sick, and a tragedy if those who have the power to influence the government to finally take urgent and pragmatic measures fail to do so.