‘How to have financially strong airlines,’ India finally begins to figure out

NEW DELHI: The ongoing West Asia crisis could pave the way for long-awaited reforms for India to have financially viable airlines and a sustainable aviation sector. The Union aviation ministry has “initiated a study on financially stressed airlines in India to assess structural challenges and identify measures to improve sector resilience.” It has asked airlines and other stakeholders to suggest reforms in policy, regulatory affairs, operations, contracts, procurement-related and other areas; the reasons for their suggestions along with the impact of the same.

The old saying in aviation, especially true for India, has been that almost everyone in this business — except airlines — makes money. Government plans to push for these reforms to “help mitigate financial distress and support the sustainable growth of the airline sector in India.”

Airlines say the list of reforms that could prove to be the difference between life and death has been known for years and needs to be implemented before others join the long list with names like GoAir, Jet and Kingfisher.

“Aviation turbine fuel should be brought under GST at 5% so it’s fully recoverable against output GST. There is a need to remove GST on international flights. There should be a single 5% GST slab for air tickets (not separate for business class). Govt must consider reverse bidding of airports on the basis of the lowest airport charges for airlines and consumers to make travel affordable, as opposed to the current practice of seeking the highest revenue share bid per passenger. There should be price surveillance on monopoly routes (routes with less than two players),” said a senior airline official.

Another top official said, “Apart from the mandatory ATF under GST, import duty on engineering spares and parts needs reforms. Airport charges need to be reviewed, as if they keep rising, the cost of air travel will only increase. The readiness of airports to park the hundreds of aircraft that Air India group, IndiGo, Akasa and other carriers will get over in the next few years has to be reviewed minutely. Flying training and maintenance training organisations need to be ramped up in both quantity and quality in India, given the aircraft orders of Indian carriers.”

Contemporary India counted IndiGo as its only profitable airline, and now that too has flown into the red. Air India's losses have led to serious concerns in Bombay House. Emerging airlines, including Akasa, Star Air and Fly91 and smaller players are also struggling in the current situation.

To be sure, the West Asia crisis has seen India provide more support to airlines than it did during Covid by taking temporary steps like cutting airport charges; first capping jet fuel prices for domestic flights and then planning to move to a price stabilisation mechanism.

“The issues afflicting aviation in general and airlines in particular are systemic in nature due to which save IndiGo and Tata-basked AI group, there are no financially strong airlines in India. Crisis are cyclical in nature with one following the other. If the sector has intrinsic strength with the right reforms, its ability to weather storms and black swan events will be better. The chances of big failures will be lower,” said an official.