..:: India Strategic ::. Civil Aviation: India's aviation industry rocked despite traffic growth in 2011

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Editorial

India's aviation industry rocked despite traffic growth in 2011

By Rohit Vaid

Published: December 2011

New Delhi. Despite a 17-percent growth in passenger traffic, India's civil aviation industry hit turbulent weather in 2011 with rising jet fuel and interest costs eating into the margins of carriers. One budget airline also had to close shop.

Along with these were some other factors that earned a bad name for the industry, such as the scandal involving some pilots with fake licences, three crashes and charges of predatory pricing against some carriers when rivals faced a workers' strike.

"Spiraling jet fuel prices and a high interest rate regime in 2011 threatened the survival of some domestic carriers," said Amber Dubey, director, aviation for global consultancy firm KPMG. "Our jet fuel prices are 50-60 percent higher than global average."

The year was dominated by the struggle Air India faced to stay afloat, as it continued to reel under a huge debt, estimated now at Rs.43,777.01 crore towards purchase of new aircraft and working capital loans.

This apart, the management faced three strikes, mainly due to late payment of salaries and a problem over the merger of Indian Airlines, which stranded thousands of passengers, and added crores in losses to the already bleeding carrier.

Other carriers also faced similar financial trouble and even approached Prime Minister Manmohan Singh last month to seek his intervention in at least getting aviation fuel and loans at a cheaper rate.

Among the other carriers, Vijay Mallya-led Kingfisher, which had acquired Air Deccan with much fanfare in 2007, shut down the budget operations to concentrate as a full-service carrier, while its market share dropped to fifth from third in October.

The only carrier that remained a profit-making operation was low-cost IndiGo, which also hit the headlines by announcing a huge order for 180 aircraft from Airbus Industrie worth as much as $15.6 billion.

Indian carriers, which flew 55 million domestic passengers between January and November against 46.8 million in the like period of last year, also utilised just 20 percent of their overseas entitlement, against 39 percent into India by foreign airlines.

Rajiv Gandhi Bhavan, which houses the civil aviation ministry, also saw a change of guard with Praful Patel first being replaced by Vayalar Ravi earlier this year and then Ajit Singh taking over last week.

Some key reforms remained unattended.

"There is need to expedite big-ticket reforms like allowing foreign airlines to buy stake in domestic carriers and rationalisation of federal and state levies on jet fuel," said Dhiraj Mathur, executive director with PricewaterhouseCoopers.

According to ministry officials, all these may be factored in when a new civil aviation policy is announced -- over the next five months.

Following are the highlights of India's aviation industry in 2011:

-Air India's debt rises to Rs.43,777.01 crore
Three strikes by Air India staff hit carrier, leaving passengers stranded
Vayalar Ravi takes over the civil aviation ministry from Praful Patel
Concern over security as some pilots charged with producing fake licences
IndiGo places order for 180 aircraft with Airbus worth $15.6 billion
Kingfisher shuts budget operations, the erstwhile Air Deccan
Prime Minister Manmohan Singh meets the airline chief
After Praful Patel and then Vayalar Ravi, Ajit Singh named Civil Aviation Minister

(IANS)