Shrinkage in air passengers: Minister concerned

Civil Aviation Minister Ajit Singh on Tuesday expressed concern over shrinkage in air passenger traffic numbers in the last three months but hoped that the buoyancy in the sector would lead to a spike in the long-run.

"In the past three months, the traffic numbers have fallen.

Following the global economic downturn, there were worries about a downturn in the Indian economy.

There were estimations about a fall in gross domestic product growth and there were issues relating to high costs.

And airlines and the hospitality industry are the first to suffer from this," Singh told the Economic Editors conference in New Delhi.

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"We hope that in the long-run the traffic will increase. It is bound to increase," he said.

Official figures have shown that in July-September, the air traffic has shrunk month-over-month by 9-11 per cent.

However, between January-August this year, international passenger traffic grew by 15 per cent over the same period last year and the number of passengers carried rose marginally from 39.63 million in 2011 to 39.82 million this year.

The overall losses of all Indian carriers totalled about Rs 10,000 crore (Rs 100 billion), he said, adding, half of their debt related to aircraft purchase apart from massive working capital loans.

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Giving a brief on various aspects of the civil aviation sector, the Minister said the government had undertaken a series of initiatives to further the growth of the sector.

In order to promote regional air connectivity, he said the government had approved creation of 15 greenfield airports and work on three of them -- at Mopa (Goa), Navi Mumbai and Kannur -- is likely to begin by the end of this fiscal.

A total of Rs 24,132 crore (Rs 241.32 billion) would be made available for airport development in the 12th Plan period, including Rs 17,500 crore (Rs 175 billion) investment in the central sector.

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To promote connectivity to Tier-II and Tier-III cities, he said changes were being made in the Route Dispersal Guidelines, which make it mandatory for all Indian airlines to operate to socially-important but financially unviable routes in the Northeast, Jammu and Kashmir and A&N Islands.

Singh said the Aircraft Acquisition Policy was also being amended to 'nudge' the Indian carriers to buy smaller planes to operate to smaller cities.

Singh said, "We have engaged consultants to help formulate (changes in the route dispersal guidelines) and their report is expected in two months".

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Government was also having a re-look at the Aircraft Acquisition Policy, under which Indian carriers would be 'nudged to acquire smaller planes to fly to smaller cities, we can't mandate them to do that.

'They would also be asked to submit detailed business plans to help us understand how many planes they would require," Singh said.

Other measures initiated by the government include allowing foreign airlines to invest foreign direct investment upto 49 per cent in Indian carriers, allowing airlines to directly import jet fuel, seeking rationalisation of taxes on it, modernising a large number of airports in metros and non-metros, initiating steps to establish a Civil Aviation Authority, a separate Air Accident Bureau and Civil Aviation Security Force.

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Asked about the response of liberalising FDI in the sector so far, Singh said "no one (foreign airline) has approached yet.

"It is an enabling provision and part of a long-term policy.

"Aviation business in highly complicated. Let us see what happens."

Maintaining that there was 'a very low level of investment' in aviation due to the high risk factor, he said substantial FDI could only come if foreign carriers were permitted to invest.

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"The purpose is to bring in strategic foreign investors, apart from expertise and experience."

Regarding high aviation turbine fuel prices which account for 45-55 per cent of an airline's total operational cost, he said Civil Aviation Ministry was in talks with other concerned ministries to declare aviation turbine fuel as a notified good and to bring its pricing under the ambit of Petroleum and Natural Gas Regulatory Board.

Efforts were also governments, which imposed five-30 per cent sales tax on ATF, which would bring down its prices, the minister said.