Why in News?
Recently, the Wadia group declared insolvency for their airline company G First, which results bringing down gates of Go First Airline.
What was the historical underpinning?
Eight independent domestic airlines – Deccan Airways, Airways India, Bharat Airways, Himalayan Aviation, Kalinga Air Lines, Indian National Airways, Air India (formerly Tata Airlines), and Air Services of India merged and formed a single entity named Indian Airlines in the year 1953, resultes a state monopoly in the aviation sector.
But, the economic reforms made in 1992 brought some hope in the private sector aviation industry. In the years that followed, the sector saw the entry of quite a few new players even as the businesses of others collapsed or were taken over. Lator on government abolished the Air Corporation Act of 1953, which gave the state owned airlines the monopoly to operate as scheduled airlines.
Besides this, an Open skies policy was also introduced in 1992, to open the commercial aviation market.
When was the new era came into light?
The real expansion of private airlines, and the number of domestic passengers in India, began in the 2000s. In 2003, Captain G R Gopinath launched Air Deccan, the country’s first low-cost carrier, which was followed by SpiceJet, Indigo and GoAir. All these carriers followed a model of no-frills, cheap tickets and high passenger load factors.
The LCC (low-cost carrier) model revolutionised the Indian aviation sector, pushing the country’s annual passenger growth rate to double digits, but the situation was no longer favourable. Unforeseen circumstances resulted financial stress of Airline sector.
The government introduced a significant policy change in 2004 by introducing the 5/20 rule, which means that airlines with more than 5 years of experience and more than 20 aircraft can operate international flights. However, the policy was scrapped in 2016, and new policy 0/20 was introduced.
Over the next four years, the aviation industry grew at an average rate of 20%, which was the fastest in the world. Indian citizens started preferring this mode of transport in travel.
What are the challenges before aviation sector?
- Fuel cost accounts 40% of carrier cost, and tax on aviation turbine fuel is one of the highest in world in India.
- Crony capitalism and funding to aid NPA of the stressed airlines. e.g. funding to the kingfisher airlines.
- Ignorance of rules made by Directorate General of Civil Aviation.
- Irregularities in the decision making within the DGCA and Civil Aviation Ministry.
- No financial audit by the DGCA ever of any airline operating in India.
What are the possible remedies?
- Aviation sector should possess transparency and accountability.
- Civil Aviation industry should be revamped completely.
- Every airline should lock some fund for the payment of salaries and other dues in case of shutdown.
- Trained and experienced professionals should be included in the management to run the sector.