Brace for impact: India's growing aviation sector

As the aviation sector foresees exponential long-term growth, ensuring cost-efficiency, qualified manpower and informed regulations is critical to its preparedness.

The story of India’s civil aviation sector, on the cusp of transformational growth and powered by impressive projections and aircraft on order, is also one with bleak twists around passenger distress, grounded businesses and weak regulatory systems.

The Centre for Asia Pacific Aviation (CAPA) India, an aviation consultancy agency, forecasts that by 2043, India could be handling 1.3 billion passengers and operating a commercial fleet of 4,000 aircraft. The industry handled close to 200 million passengers in FY23.

According to the Directorate General of Civil Aviation (DGCA), the first quarter of the current year (January-March) saw 37.5 million passengers flying domestic. This is also the best-ever first quarter for India’s domestic aviation sector, billed as the world’s third largest, behind China and the US.

Read | Air India, Air India Express hired more than 3,900 people this year, says Campbell Wilson

The projections are consistent with the outlook for India’s increasingly aspirational middle class. However, even the more conservative estimates place the industry in position for an overhaul – of regulations, service standards, trained workforce and physical infrastructure that includes the construction of new, higher-capacity airports.

Industry analysts underscore post-pandemic traffic patterns to predict a scenario where bullish airlines will expand and reinvent themselves in a busy market, in attempts to meet the requirements of a demanding, discerning passenger base. They are also hopeful of the industry beating the pandemic-induced stress that impacted the sector.

Tanuj Kapta, team lead of consulting and research, CAPA India, said “dramatic changes” in the financial landscape over the past nine months have helped the industry clear massive losses incurred during the pandemic years, leading it toward profitability.

“Going forward, we anticipate that two-three strong players in the short to medium term and three-four players in the long term will emerge. This suggests that while some airlines may struggle or face difficulties, there is potential for a consolidation process to occur, resulting in a more streamlined and resilient industry,” he said.

Minister of Civil Aviation Jyotiraditya Scindia has been vocal about a liberalised approach with simplified regulations at its centre. The State envisions India’s aviation system to support a $20 trillion economy by 2047, when the country will celebrate its 100th year of independence.

The minister said India was at an inflection point, poised between infancy and substantial growth, with its current fleet size of around 700 being expected to grow to 2,000 in the next five to seven years. “With more disposable income, rapid urbanisation and projections of economic growth, the industry is set for steady growth,” he said.

CAPA India’s recent call for a new civil aviation policy that keeps pace with the projections echoes industry voices that seek more sustainable business models. Informed policy interventions could be the first step toward steering the sector beyond the obvious vanity value it carries for India’s billionaires and bring a sense of balance to an industry that is grappling, at once, with promise and limited preparedness.

The biggest challenge is an environment of hostile regulations and high-cost operations that offer no relief to the operator, aviation expert Harsh Vardhan said.

“The fuel taxes in India are among the highest in the world. The fall in the rupee adds significantly to the costs. This is also an industry where there are no subsidies to help airlines in overcoming setbacks like the pandemic,” Vardhan, chairman of Delhi-based Star Air Consulting, said.

Taxes levied on Aviation Turbine Fuel constitute up to 40% of the airline operating costs and translate to higher ticket prices. Kapta said the government needed to balance revenue generation with promoting a competitive, customer-friendly aviation industry. “Implementing passenger insurance, like the ATOL (Air Travel Organiser’s Licence) system in the UK, would provide a safety net for passengers and protect their funds in the event of airline failures. We have been making this recommendation since 2010,” he said.

Vardhan said issues, including operational lapses, were indicative of a “still-maturing” sector. “There will be bumps in between (the growing years) but there is a huge latent demand that will cover those issues. The real reform has to happen at the regulatory level. We have entrusted the critical responsibility of regulating a highly specialised sector to bureaucrats with no real technical expertise,” he said.

Kapta said the existing National Civil Aviation Policy, released in 2016, also needed a refresh due to significant changes brought about by the pandemic and transformations in the industry. “The industry structure is also witnessing a shift, with two principal players gaining prominence. The emergence of mega carriers further necessitates a revised policy that accounts for their unique requirements and contributions. These carriers have the potential to shape the market dynamics and competition, and the policy should strike a balance between enabling their growth and fostering a level playing field,” he said.

Recruitment

The Ministry of Civil Aviation has maintained that liberalised policies are improving the availability of pilots, engineers and cabin crew. It said recruitment of Air Traffic Control Officers has also improved by about 33% over the past three years.

Research by CAPA estimates that India will need about 10,900 additional pilots by 2030. However, the country has at least 5,000 unemployed Commercial Pilot Licence holders, most of them left behind in an industry with a low rate of absorbing freshers.

C S Randhawa, secretary, Federation of Indian Pilots (FIP), pointed to the manner in which a captain was “unfairly” de-rostered over the urination incident on board a New York-Delhi Air India flight, in November last year. He also highlighted provisions in existing work contracts that are detrimental to the pilots’ interests.

Randhawa is sceptical about the industry’s state of readiness. “This is not only about training pilots; where are we going to find experienced pilots for all these new aircraft? The other point is about infrastructure – big airports, like in Delhi and Mumbai, already face a space crunch. How are they going to handle such huge numbers? The government needs to consider these factors as it creates space for this growth,” he said.

With liberalised guidelines in place, the government is planning to increase the number of Flying Training Organisations in the country from 35 to 50, by the end of 2023. Randhawa, however, underlined the higher costs involved in training in India.

The planes are coming

Vardhan said ground infrastructure is “slowly catching up” with the projections for the growth of the industry as more cities are mooting second airports and upgrades on existing airports. He said the aircraft order pipeline was significant in the Indian context.

The DGCA statistics for the first quarter of 2023 reveal Indigo as the dominant player, accounting for 55.7% of the market share. The carrier is expected to have 490 aircraft including Airbus XLRs join its fleet by the end of the decade. Its competitor, Air India (9% of market share), has placed a record order of 470 aircraft, with Airbus and Boeing. Vistara (8.8%) is eyeing a fleet of 70 aircraft by 2024.

While the promised boom is a starting point for the government and the industry to formulate policy for the long haul, there are more immediate challenges to address.

Go First’s insolvency filing and dispute with engine maker Pratt & Whitney are important markers at this transition point. The airline contends that it had to ground half its fleet because P&W failed to supply replacement engines on time. The dispute has set off larger discussions on bankruptcy protection laws and a perceived drop in confidence among aircraft lessors in India.

The carrier, which was already reeling due to the pandemic, follows two major Indian players that folded in 2012 (Kingfisher Airlines) and 2019 (Jet Airways).

Pilots left in the lurch

After months of delayed salaries, Go First pilots are moving out. Prolonged notice periods – of as long as a year for commanders and six months for pilots – have severely limited their options. Some of the airline’s employees claimed that contractual obligations are not being fulfilled, a concern raised by pilots across carriers.

The shortage of experienced commanders and sparse recruitment have added pressure on the experienced pilots in service. Pilots also highlight unrealistic rostering schedules, poor work-life balance, lack of support systems and negligible pay increments (about 4-5% since 2016).

“Companies tend to follow DGCA’s Flight Duty Time Limits for guidelines but fatigue risk management is not up to the mark and the rules are not clear. As pilots, we are unable to report genuine fatigue and sickness because we fear losing our jobs,” an Air India commander said.

Several pilots maintain that Indian airlines are not focusing on the pilots they already have, but are readily paying two-three times their salary to Foreign Aircrew Temporary Authorisation pilots along with other benefits, for doing the same job. The discrepancy forces Indian pilots to look at overseas options.

Randhawa said capacity-building measures needed to be complemented by efforts to remove “lopsided regulations” that fail to protect pilots even when they are left to handle issues beyond the scope of their employment.

(With inputs from Lavpreet Kaur in Bengaluru)