Q. What are your views on the draft National Civil Aviation Policy (NCAP)?
I am very excited about the prospects of Indian aviation. IATA forecasts that India is going to be the third largest aviation market in the world within 10 years. So clearly it’s a good thing that the government has put together an aviation plan that will help make this happen. Certainly having an aviation plan like this is a step in the right direction but I do have to say that I am concerned about some aspects of it. Particularly where it’s going to ride cost to the industry or in some cases deviate from what are well accepted, tried and tested global principles. I have written to Ashok Gajapati Raju, Minister of Civil Aviation and Choubey, Civil Aviation Secretary about these issues in the last week.
Q. What are the concerns about NCAP?
I have three main concerns. The first one concerns the proposed 2 per cent regional connectivity fund levy. Then there is an issue about the proposed auctioning of traffic rights. And finally, I am very concerned about the proposal to use dual or multiple till when we are looking at how India’s charges should be regulated.
Q. What are you concerned about the 2% regional connectivity fund?
The 2% connectivity fund levy is going to add a huge burden of cost to the industry in India. It’s already very expensive place to operate, by putting this regional connectivity fund levy on it’s going to add something like $350 million a year further to additional costs for airlines in India. And rest assured, in the end it’s the airlines who are going to pay because of the competitive market, fares are set in the market, the amount the passenger pays is set in the market. So it’s going to be a real drain and a financial strain on the airlines in India
Q. Why is the auctioning of traffic rights a concern?
I have never heard of the auctioning for traffic rights before. This is something that no country does. They don’t do it for very good reasons. If you auction traffic rights the consequences will be very hard to predict. One of them I feel would be the concentrating of the market in a few powerful hands. After all the only people who will be able to afford to buy traffic rights will be the ones who are making lots of money already. So I think it could be a very anti-competitive move and it’s something that is really unprecedented in world aviation.
Q. Why is IATA concerned about the hybrid till approach?
The civil aviation policy is a one place to determine the hybrid till approach. Airport regulation is a very complicated issue which it involves a lot of different factors like the rate of return, the sort of till you want to use, the amount of investment required, so on and so forth. There are a lot of different elements in there and its wrong just to take one of them and regulate it must be a hybrid till. The AERA (Airports Economic Regulatory Authority of India) is who should determine what sort of till should be used. Putting it into law and regulation through the civil aviation policy is the wrong approach. The AERA and the Ministry of Finance itself both support a single till approach which is certainly the one that IATA believes is the correct way to move forward in this area.
Q. So what should India do?
India should develop its aviation policy to try to realize the huge potential of this market. Indian aviation will support 19 million jobs and $170 billion in GDP. We see the potential for 350 million passengers by 2034, we see an enormous potential for the airlines and of course for aviation to play a vital role that it can do in connecting the Indian economy within India and also to the world. But to do that the government needs to move forward with the right policy approaches and those policy approaches are the ones that embrace the idea of partnership with the industry and deep consultation with industry because we all want the same in the end. If the government will consult the industry, talk to the experts, we can do this together.
