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Force Magazine

Sky is the Limit
Domestic airlines are preparing for better times as air travel picks up

By Atul Chandra

Civil aviation

The Indian civil aviation sector is slowly coming out of the gloom that enveloped the sector over the last few years. The new government, while seized of the issues that beset the sector as a whole, faces an unenviable task in getting the civil aviation sector back on the road to good health.

According to the India arm of Centre for Aviation (CAPA), a globally recognised provider of industry research and analysis for the aviation industry, “High sales tax on ATF, infrastructure bottlenecks both on ground and in air, policy and regulatory framework not aligned to industry requirements, archaic systems and processes at Directorate General of Civil Aviation (DGCA), debt driven expansion and challenges that new six airlines are likely to create starting next fiscal are some of the main issues.”

All the factors for a vibrant civil aviation ecosystem exist and improved business sentiment in the sector would not only generate a large number of skilled jobs (an estimated 350,000 in the next decade) but also enable India’s private sector rightfully take its place as an important part of the global supply chain for commercial and business aviation requirements. An estimated USD 80 billion would be required to fund fleet requirements for domestic airlines by 2020, with an additional USD 30 billion required for airport systems, says the ministry of civil aviation.

Preparing for Growth: According to the Airports Authority of India (AAI), the “Traffic at all Indian airports, taken together in terms of aircraft movements, passenger and freight, are expected to grow at the rate of 4.2 per cent, 5.3 per cent and 5 per cent respectively for the next five years.” According to information provided by the ministry of civil aviation, “Passengers carried by domestic airlines during January-May 2014 were 26.72 million as against 26 million during the corresponding period of previous year, thereby registering a growth of 2.78 per cent.” In July the government announced that it had “taken several measures to revive the aviation industry and ensure long term viability of the sector.” These measures included discussing rationalisation of VAT on Aviation Turbine Fuel (ATF) with the state governments, permission of Director General of Foreign Trade for the direct import of ATF by airlines on actual user basis, permission to foreign airlines to invest in the equity of domestic carriers up to 49 per cent and permission to airlines for an export clearance board (ECB) up to USD 1 billion to meet their working capital requirement.

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