Friday, May 2, 2008

India's Pro-Aviation Measures

The Indian government took two substantial steps last week towards helping their country meet the infrastructural demands accompanying their rapidly growing aviation sector. Last week, India cleared a policy where new airports may be setup within 150km of each other so long as the plan receives government approval. Prior to this shift in policy, India had forbade all airport construction which violated the 150km rule. Industry observers have argued that the old position would be unsustainable given India’s push to improve its aviation sector by expanding services and increasing its fleet size. In 2005, India spent over $13 billion at the Paris Air Show on new aircraft orders—a 164% growth in its fleet. Compared with the 2.7% growth the rest of the world experiences, it is evident that India needs to take swift steps to ensure it can readily utilize the new craft.

In addition to the relaxation of the 150km rule, India also announced that airport projects falling outside of the 150km radius would no longer need pre-approval from the Central Government but would instead only need to apply for licensing from the Directorate General of Civil Aviation (DGCA). Private airports established for non-scheduled traffic and cargo were also relieved of needless pre-approval hurdles with licensing coming from the DGCA. Both measures should encourage airport growth with the latter helping to relieve congestion at India’s public airports. There is also hope that the private airports will contribute to the improvement of air services within India as their success will depend exclusively on their ability to attract private business.

Indian aviation still faces some significant hurdles. Airport charges in India are substantially higher than those found in neighboring countries. K. Ramalingam, Chairman of the Airports Authority of India, has stated that "[t]here is a need for providing better services and reducing various charges levied by the airports to make them more profitable. Reduction in charges and better services will invite more air carriers and help in earning more money." The International Air Transport Associated has long criticized India for what it perceives to be excessive and unbalanced landing charges. According to IATA, India’s charges should be cost-based and rationally related to the services being provided. Instead, the organization has observed India overcharging for services at seven profitable airports in order to cross-subsidize its non-profitable ones. A business model similar to the one pursued in Singapore and Hong Kong where non-aeronautical revenue is used to support international airports has been suggested by IATA as a way for India to reduce its charges. IATA is also supportive of India’s Airport Economic Regulator Authority Bill which would establish a monitoring body for India’s airport charges. Currently, the bill is still sitting before the Indian Parliament awaiting approval.

May 2, 2008 | Permalink | Comments (0) | TrackBack (0)