Aviation sector: Policy changes and their impact

The last two decades have seen momentous policy changes that have morphed the very contours of the aviation sector. Some of these are:

1994: Repeal of the Air Corporations Act. This ended the monopoly of Indian Airlines and Air India to operate domestic flights and paved the way for the entry of private players like Jet Airways. Besides Jet Airways, Sahara India Airline and Archana Airways were given licences to operate as Scheduled Private Airlines. Alliance Airlines, a subsidiary of Indian Airlines, started functioning in 1996-97.

2004: The first time that the private sector was involved in any aspect of civil aviation. Private parties were involved in creating greenfield airports in Bangalore and Hyderabad. The Hyderabad airport, which was developed by a consortium led by the GMR Group, and Bangalore airport, led by a Siemens-headed consortium, both became operational in 2008.

2006: With the arrival of the Manmohan Singh-led UPA-I Government the model for airport modernisation changed with the Government giving Delhi and Mumbai airports on long-term lease to consortiums led by the GMR and GVK Groups, respectively.

2008: The Government announced a new policy for greenfield airports that did away with mandatory approval from the Central Government for setting up of any greenfield airport. The move paved the way for the entry of more private players and the opening up of more airports. But a question mark hangs on whether this actually happened. Minister of State for Civil Aviation K.C Venugopal informed the Rajya Sabha that the Government planned to construct 17 airports during the 12th Plan period (till 2017). The cities where airports are planned include four in Karnataka – Gulbarga, Bijapur, Hassan and Shimoga; two in Kerala – Aranmula and Kannur; and, one in Puducherry – Karaikal. In addition, three new airports are planned in Maharashtra, including one each at Sindhudurg and Navi Mumbai.

2008: With the entry of the private sector in airports, the Government constituted the Airports Economic Regulatory Authority that was mandated to look at the capital expenditure incurred and timely investments in airport facilities apart from looking at the services provided and their quality.

2012: In September, the Government allowed foreign airlines to acquire a stake of up to 49 per cent in domestic airlines. The move was considered progressive as most Indian banks were reluctant to lend monies to Indian carriers which were reeling under heavy losses. Many argue that the move to allow FDI in the domestic aviation sector was an attempt at correcting a wrong — the Government had agreed to pump in close to Rs 40,000 crore in the state- owned Air India while private carriers were left struggling.

2013: In February, the Government was able to push through Flexible Use of Airspace (FUA) by both civil and military users. In India, like in several countries, air space is controlled by both civil and military users. FUA allows both of them to use the same airspace on a sharing basis according to their needs on a real time basis.

2013: In April, Jet Airways announced that it was selling a 24 per cent stake to the Abu Dhabi-based carrier Etihad for a consideration of about Rs 2,050 crore.

The Jet announcement came days after the international low cost carrier AirAsia announced that it was forming a three-way joint venture with Tata Sons and Telestra to float a new low cost airline in India. The new airline is to see an initial FDI inflow of about $30 million.