News Update :

Taking Wing

Wednesday, February 15, 2012



Taking Wing

Government should play facilitator in aviation sector



    The government’s done well to scrap Air India’s (AI) exclusive privilege over foreign routes. The national carrier’s stranglehold on bilateral air traffic rights meant private domestic airlines could operate international flights only after AI had exercised its right of first refusal. The policy coddled the ailing state-owned Maharaja by shielding it against competition on lucrative international routes. As a result, many routes and flying slots remained unutilised. Incredibly, AI could deny private players overseas flights even if it didn’t operate them. With its monopoly ending, private airlines will be able to expand their overseas operations. 
    Today, with many western carriers facing crisis, Asian economies are anticipated to buoy global aviation, with considerable buzz around Chinese airlines and low-cost carriers of Southeast Asian countries like Malaysia and Indonesia. The news from India, in contrast, is gloomy. To be fair, the authorities now realise that all carriers, not just AI, are in deep financial trouble which, worryingly, has been seen to impact safety. This explains a group of ministers backing the proposal to allow foreign airlines 49% stake in domestic carriers. If implemented, it’ll mean capital infusion for cash-strapped firms. There’s also the nod 
to direct import of aviation turbine fuel (ATF), which accounts for about 40% of an airline’s costs. 
    However, while liberalising the industry as proposed would indeed be an investor-friendly signal, domestic airlines have to get into better financial shape in order to attract interest in equity sale. In this context, logistical issues may cancel out the benefits of ATF import. Airline operators will have to create storage facilities at ports besides transporting jet fuel to airports, of which only a few allow refuelling infrastructure on an open access basis. Surely it makes more practical sense to slash the steep taxes on jet fuel 
that direct import is meant to help avoid. High airport landing, parking and other charges should also be reduced. 
    Top voices at the International Air Transport Association feel high taxes, inadequate capacity in Mumbai and rising infrastructure costs in Delhi hold back Indian aviation’s potential. We clearly need a culture of competition to help the industry grow and generate resources for capacity-building. To boost business confidence, the authorities must stop propping up AI at huge taxpayer cost and by skewing rules in its favour. The government must play facilitator, not rescue act for airlines marred by inefficient resource management and reckless business policies. Eased regulations and tax structures must be geared to creating a level playing field wherein airlines compete to succeed or fail according to commercial logic. The sector can do with AI’s privatisation as well as a shakeout. Consumer interests will be best safeguarded when professionally run carriers get to profit and expand.
Share this Article on :
Related Posts Plugin for WordPress, Blogger...
 

© Copyright Editorial News 2010 -2011 | Design by Herdiansyah Hamzah | Published by Borneo Templates | Powered by Blogger.com.