Air travel for the aam aadmi

Back in 2005 when India’s first budget airlines were taking wing, this was a common sight at airports: Swarms of local travellers clicking their way to the first airplane journey of their lives, or thrifty Indian families unpacking home-cooked food onboard in scenes that one might see on a train journey in India. The early offerings from low cost, no-frills airlines revolutionised air travel, so much so that if one got lucky online, tickets could even be cheaper than the to-and-fro airport taxi fare.

Good times they were, until three years back. Thereafter, high fuel costs, taxes and a general mismanagement of air routes quickly pushed up fares. To be sure, economic prosperity has boosted air travel in India at a fast clip. Yet, with average airline tickets now costing way above erstwhile full-service fares, the budget traveller in India has been priced out of the skies.

But can this change? Is the Indian airline industry capable of transforming itself from serving a tiny fraction of the 1.2 billion population to becoming the mode of choice for long-distance travel for the entire country? Simply put, can more train-travelling Indians fly?

The answer is yes, and they must because a well-established air transport industry plays a role in facilitating growth in a nation’s standard of living and economic activity.

About a decade and half ago, it cost about ₹16 to make a local mobile phone call in India. A liberalised telecom policy led to fierce competition among mobile operators. Today, India has about 900 million mobile phone connections and the average tariff has plummeted to half a rupee.

The learnings from many other sectors are similar, including the automobile and banking industries. When private banks were allowed in India many cried foul on the grounds of unfair competition. In the end, the Indian consumer has only benefited, enjoying wider choices and price affordability.

Today, an average one-way plane ticket between New Delhi and Mumbai is priced at about ₹6,000, with a flying time of about two hours. The same distance is covered by train in 16 hours at a third of the cost. Adjusted for per capita income, the choice of rail travel is rational for an average Indian consumer travelling with a family of four, because the total savings exceeds the amount of income which could be earned in that time.

In future, per capita disposable income in India will rise fast. But consumer affordability, a key sign of any mature utilities market, will be determined only by healthy competition among airline companies.

The main fear expressed by Indian aviation companies is that foreign carriers will flood the market with cash, buy stakes and take over India’s skies.

In reality, like in other parts of the world, running airlines profitably in India is a challenge and some ventures have grounded.

But, a decade of competition at home has also resulted in some clear leaders that have operating standards and business strength comparable to international peers. They have little to fear from global airlines wanting to come to India.

Besides, competition will help reduce the cost of capital for bleeding domestic carriers, allowing them to undertake necessary investment. It will also ease the transfer of cutting-edge technology and global best practices.

Improvements in efficiency, service and quality standards will generate savings, helping increase consumer affordability.

With changes to foreign investment rules, India’s struggling aviation industry is on the cusp of transformation. A new low-cost domestic carrier backed by Malaysian budget airline AirAsia and the Tata Group is in the offing. Global majors Etihad and Singapore Airlines are looking at investment options here. A price war is brewing again, although cheap tickets remain elusive.

Which brings us back to the key question: Will our focus finally be on how many Indians are flying rather than how many domestic airlines are flying the Indian skies?

One can only hope for the best.

The writer is Regional President of Indo-American Chamber of Commerce