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India's aviation sector struggling to soar
Publication Date : 12-02-2014
India's aviation sector is starting to shake off the doldrums with the launch of two new airlines, at least one this year, in a rapidly expanding market.
Hampering that recovery though will be the downgrade of India's aviation safety rating last month by the United States, which prevents its carriers from launching new flights to the US, or having code- share deals with American partners.
Last week, Singapore delivered another blow to the industry when it too announced that it is stepping up inspections of Indian carriers.
Others, notably the European Union, said the US move was of "significant interest".
"Aviation is growing in India and has to be robustly and efficiently managed. It is disgraceful because (the government) was given warning but did not pay heed it," said Jitendra Bhargava, former executive director of state-owned Air India. "You need adequate manpower (for safety) commensurate with the growth of industry."
The downgrade from the US Federal Aviation Administration, from category 1 to category 2, means India's safety oversight regime does not meet global standards, putting it on a par with countries such as Bangladesh and Zimbabwe.
The India aviation sector has seen a boom in the last decade as economic growth fuelled the growth of its middle class. It is now the ninth-largest market handling 121 million domestic and 41 million international passengers annually. More than 85 international airlines fly to India and 5 Indian carriers connect it to over 40 countries.
In April, Tata Group, in partnership with Malaysia's AirAsia, will launch a new budget carrier and Singapore Airlines has tied up with Tata for a full-service carrier.
But the regulatory framework has not kept pace with growth. The aviation ministry, for instance, announced it is appointing 75 additional full-time safety inspectors as it scrambles to fix the problems.
According to the Centre for Asia Pacific Aviation (Capa), a research group, India's Directorate General of Civil Aviation (DGCA), with a workforce of 400, has 528 positions vacant.
"It won't be easy to get all that technical expertise and the DGCA has to offer enough to get the expertise," said Rajan Mehra, former India head of Qatar Airways, now with the US-based Universal Weather and Aviation, a private jet operator.
"I don't think Indian airlines are unsafe," he said. "But there are fewer safety inspectors, so the DGCA has been asking airlines to do their own safety checks - that is a little tricky."
Countries in similar positions have taken time to recover. Israel took four years to earn its ratings back, Indonesia six years and the Philippines is still trying after being downgraded five years ago. Mexico did it in four months.
Capa predicted it "could take India a long time to restore its rating" and the harmful implications could endure well beyond that time. Indeed, Indian airlines like Jet Airways will have to put expansion plans to the US on hold.
Indian carriers have been struggling with high operating costs and interest rates and, in 2012, had a collective debt of US$20 billion. But opening up the sector to foreign investment has seen the industry get a fresh lease of life. Jet Airways, for instance, sold a 24 per cent stake to Gulf carrier Etihad.
"This (downgrade) is maybe a blessing in disguise," said Bhargava. "It will make the (civil aviation) ministry act."