Dr Ashwani Mahajan
Two decades ago air travel was limited to a select club of politicians, officers and bureaucrats. There was a complete monopoly of public sector civil aviation corporations (Air India and Indian Airlines etc.). Air travel was very costly. At a point of time, when per capita income in the country was hardly rupees 5000 per annum, one sided air fare from Delhi to Mumbai was between rupees 6000 and rupees 10,000. Time changed, and a big number of low cost private aviation companies entered into the market, leading to big reduction in fares and number of passengers multiplied. Today, when per capita income in the country is nearly rupees one lakh annually, one can travel between Delhi and Mumbai for a mere rupees 2100 (if booking is made well in advance). Growth in civil aviation is evident from the fact that number of air passengers increased from 1.40 crores in 2000-01 to 13.5 crores (both domestic and international). That is, 16.3 percent growth annually. During 2015-16, this growth has been 21.6 percent and 9 percent in domestic and international passengers respectively.
Aviation Flying High
Thanks to fast growth in Indian civil aviation, private sector companies have started achieving big targets. Company on the forth position in terms of business, ‘Spice Jet’, has placed orders for 205 Max 707 aircrafts from Boeing company. This huge order from a company on fourth position, has raised expectations in the industry. It is notable that before this largest company ‘Indigo’ and another company ‘Go Air’ had also placed orders with ‘Airbus’ for few hundred aircrafts. Global manufacturers of aircrafts are looking forward to Indian aviation market for their future growth.
From Losses to Profits
A few years back, Indian aviation companies have been incurring huge losses due to cut throat competition on the one hand and high petroleum prices on the other. In last few years, their losses have been wiped off and now they have started recording profits, as prices of petroleum products have come down heavily, leading to low fuel cost. However, competition in the aviation sector continues, causing huge reduction in fares. It is notable that if one books an air travel few months in advance, he/she pays only rupees 2100 and rupees 2800 for Delhi-Mumbai and Delhi-Bangluru sectors respectively. However, 2 tier AC travel (Rajdhani) costs rupees 4105 and rupees 5470 respectively. This means, competition among aviation companies have brought air fares to nearly half (or even less) than railway fares.
Despite this competition they are earning profits. But their profits may vanish if petroleum prices increase. If we go by Economic Survey 2016-17, petroleum prices may increase by 15 percent or even more. Therefore if this happens, profits of aviation companies may evaporate.
India’s Growth Story
In 2014, 324 crore people travelled by air globally, which increased to 348 crore and 370 crore in 2015 and 2016 respectively. This means travelers’ growth had been 7.1 percent in 2015 and 6.3 percent in 2016. However, if we look at travelers’ growth in India we find that in 2014-15, 11.6 crore people travelled by air, which increased to 13.5 crores in 2015-16. This implies 16.4 percent growth. On an average, Indian civil aviation industry experienced a growth of 8.3 percent annually in terms of passengers in last 15 years. Global giant ‘Airbus’ expects 11 percent growth in Indian aviation. Today there are 22 civil aviation companies operating in India. India stood at 9th position globally in civil aviation. It is expected that by 2020, our civil aviation industry will reach at 3rd position globally. This is so because we are expecting at least 11 percent growth in comparison to hardly 5 to 6 percent growth globally.
Imperative for Healthy Growth of Aviation
In the last 15 years, air passengers (domestic and international) in India grew 9.65 times; and Indian civil aviation industry reached at 9th position globally. Thanks to fast pace of Indian civil aviation, global air craft manufacturers are looking towards India as their potential market, where they can sell 1850 aircrafts by 2036. However, Indian companies have been facing huge problems due to cut-throat competition. It is notable that this cut-throat competition forced India’s first private sector aviation company ‘Air Deccan’ to ‘Kingfisher’ another aviation company, which itself went into bankruptcy later. Thanks to lower petroleum prices, these companies have again started earning profits. However, we must understand that this situation is not going to last forever.
Today, the need of the hour is that all companies progress on the basis of healthy competition. There should be a complete assessment of passenger traffic on all routes and accordingly fare structure be arrived at. In the present system one can travel at a very low fare, if tickets ae booked well in advance, but heavy tariff is charged if tickets are booked for current travel. According to data published by Directorate General Civil Aviation (DGCA), seats ranging from 8 to 33.5 percent remained vacant in 2015-16 in different aviation companies. It is ironical that whereas lakhs of railway passengers are unable to travel on waitlisted tickets, so many seats go vacant for want of passengers. We can easily encourage passengers, from waitlisted AC railway tickets to travel by air, by giving slightly higher fare. Air India has introduced this service partially. Other aviation companies should follow suit.
(The author is Associate Professor, PGDAV College, University of Delhi)
Dr Ashwani Mahajan