CIVIL AVIATION

Overview

The history of civil aviation in India began in December 1912. This was with the
opening of the first domestic air route between Karachi and Delhi by the Indian state
Air services in collaboration with the imperial Airways, UK, though it was a mere
extension of London-Karachi flight of the latter airline. Three years later, the first
Indian airline, Tata Sons Ltd., started a regular airmail service between Karachi and
Madras without any patronage from the government.
At the time of independence, the number of air transport companies, which were
operating within and beyond the frontiers of the company, carrying both air cargo and
passengers, was nine. It was reduced to eight, with Orient Airways shifting to
Pakistan. These airlines were: Tata Airlines, Indian National Airways, Air service of
India, Deccan Airways, Ambica Airways, Bharat Airways and Mistry Airways.

In early 1948, a joint sector company, Air India International Ltd., was established by
the Government of India and Air India (earlier Tata Airline) with a capital of Rs 2
crore and a fleet of three Lockheed constellation aircraft. Its first flight took off on
June 8, 1948 on the Mumbai (Bombay)-London air route. At the time of its
nationalization in 1953, it was operating four weekly services between Mumbai-
London and two weekly services between Mumbai and Nairobi. The joint venture was
headed by J.R.D. Tata, a visionary who had founded the first India airline in 1932 and
had himself piloted its inaugural flight.
Significance of Air Transport
Air transport is the most modern, the quickest and the latest addition to the modes of
transport. Because of speed with which aeroplanes can fly, travel by air is becoming
increasingly popular. As far as the world trade is concerned it is still dominated by sea
transport because air transport is very expensive and is also unsuitable for carrying
heavy, bulky goods. However, transportation of high value light goods and perishable
goods is increasingly being done by air transport.
Nationalization of Airlines
The soaring prices of aviation fuel, mounting salary bills and disproportionately large
fleets took a heavy toll of the then airlines. The financial health of companies declined
despite liberal Government patronage, particularly from 1949, and an upward trend in
air cargo and passenger traffic. The trend, however, was not in keeping with the
expectations of these airlines which had gone on an expansion spree during the post-
World War II period, acquiring aircraft ad spares.
The Government set up the Air Traffic Enquiry Committee in 1950 to look into the
problems of the airline. Though the Committee found no justification for
nationalization of airlines, it favored their voluntary merger. Such a merger, however,
was not welcomed by the airlines.
Foreign Airlines
Foreign airlines carrying international passenger traffic to and from India existed long
before Independence. Their operations are governed by bilateral agreements signed
from time to time between the Government of India and the governments of respective
countries. In 1980-81, the number of such airlines was 35. It rose to 49 in 1996-97.

The share of foreign airlines in India's scheduled international traffic has increased. In
1971, their share was 55.58 per cent which went up to 65 per cent and declined to 58
per cent during 1972-75. It fell to 55.72 per cent in 1976 and further to 55.02 per cent
in 1977. Between 1978 and 1990 it gradually increased and rose to 75.93 per cent. In
1996, the share was nearly 72 per cent.
Open-Sky Policy
The Open-sky policy came in April 1990. The policy allowed air taxi- operators to
operate flights from any airport, both on a charter and a non charter basis and to
decide their own flight schedules, cargo and passenger fares. The operators were,
however, required to use aircraft with a minimum of 15 seats and conform to the
prescribed rules. In 1990, the private air taxi-operators carried 15,000 passengers. This
number increased to 4.1 lakh in 1992, 29.2 lakh in 1993, 36 lakh in 1994 and 48.9
lakh in 1995.
The 1996, private air taxi operators carried 49.08 lakh passengers which amounted to
a 41.14 per cent share in the domestic air passenger traffic. Seven operators viz NEPC
Airlines, Skyline NEPC, Jet Air, Archana Airways, Sahara India Airlines, Modiluft
and East West Airlines have since acquired the status of scheduled airlines. Besides
this there were 22 nonscheduled private operators and 34 private operators holding no-
objection certificate in 1996. The number of plus 120 category aircraft in the private
sector was 34 and the total fleet strength was 75 in June, 1996. Two out of seven
scheduled air taxi operators suspended their operations in 1996 because of the non-
availability of aircraft.
Infrastructure and Related Facilities
Airport Authority of India:
Set up on April 1,1995 by amalgamating the international Airport Authority of India
and the National Airport Authority of India, the Airport Authority of India was to
handle all matters relating to infrastructure for civil air traffic and transport at the
international and the domestic airports and enclaves in the country.

Indira Gandhi Rashtriya Uran Akademi:

It was set up at Fursatganj to standardize and improve the flying training facilities in
the country. Till January 1997 it had trained 289 pilots on fixed wing aircraft and 20
pilots on rotary wing aircraft.

Flying/gliding training clubs:

On December 31,1996, besides the above Akademi, 41 flying clubs/institutes and their
branches including nine private institutes were imparting flying training. Five gliding
clubs, seven gliding wings of flying clubs and a government Gliding Centre, Pune,
were imparting training in gliding.
Development of Civil Aviation
The repeal of the Air Corporation Act from 1 March 1994 enabled private operators to
provide air transport services.
Six operators were given the status of scheduled operators on 1 February 1995.

Currently there are five international airports and 87 domestic airport in the country
with 28 civilian enclaves for defence purposes.
The Airport Authority of India plans to invest Rs 35,000 million for the construction
and up gradation of airports.
Budgetary support of Rs 485.50 million was allocated to AAI in 1996-97.

In august 1996, in a major policy decision, the government allowed the private sector
to set up air cargo complexes in a bid to ensure smooth movement of export cargo.

Domestic and foreign investors including NRIs have been invited to participate in the
development of infrastructure support at select airports.
With a market share of 43% Indian airlines is the biggest player in aviation.
Rs 24,710 million have been marked for development of the civil aviation sector in the
annual plan for 1997-98.
The Indian Air cargo Market
The growth of air cargo in India has also been manifold though it might not have kept
pace with the progress made all over the world. Table 1 shows how both international
and domestic air cargo traffic has increased, reflecting an overall year on year growth.

Table 1: Trends in cargo traffic at five international airports in India.

(Figures in '000 tonnes)
Period International Cargo Domestic Cargo Total Percentage Increase
1972-73 47.4 33.6 81 -
1982-83 165.4 84.6 250 209%
1992-93 300.5 90.9 391.4 56.56%
1999-2000 494.2 183.0 677.2 73%
(Source - Transport India 2000)
Future Outlook of The Industry
Future projections reflect that the air cargo industry both in the domestic sector and
the international sector will continue in its upward trend of growth. Fig.1 reflects that
the domestic air cargo will continue at a somewhat steady rate of growth whereas the
international air cargo movement as illustrated in Fig.2 shows a steeper rate of growth
indicating that international air cargo trade will flourish at a higher rate of growth.

Fig. 1

Fig. 2(Source - Transport India 2000)

Both Domestic cargo and International cargo are poised to grow according to the
projections. The major reasons, which can be attributed to this increase, are

Increase in overseas trade

Indian economic policies
Customer service orientation
Inventory concerns-commerce development
Civil Aviation Reforms
The best thing that happened to the Indian Civil Aviation sector was that in the early
nineties, private airlines were allowed to operate. Indian Airlines (IA) pulled up its socks
and improved its efficiency by leaps and bounds. This is what liberalisation and reforms
do. The worst thing that happened to this sector is that nothing else happened ever since.
The Ministry of Civil Aviation, in its attempts at reforms, did come out with mission
statements and strategic objectives, which till date remain only on paper. The previous
minister for Civil Aviation, Shahnawaj Hussain was loathe to bringing about reforms in
this sector as that would deprive him of his stranglehold over IA and Air India (AI) along
with the loaves and fishes of office which he and his ilk enjoy. To illustrate, Mayawati,
former Chief Minister of U.P had constructed a swank bathroom at the Lukhnow airport,
complete with fancy fittings, jacuzzi and piped music to soothe her aching bones, flabby
muscles and jangled nerves.

Mercifully, Hussain was replaced by Rajiv Pratap Rudi earlier this year. Rudi is a second
- generation leader who appears to be a man in a hurry to set things right in this sector. He
quickly constituted a committee headed by former Cabinet Secretary, Naresh Chandra, to
prepare a road map for the aviation sector. The committee released the report last week
and if the recommendations are implemented it will change the face of flying in India.
The committee's main thrust was to perceive civil aviation as an area of growth and not a
play- thing for the elite. What it recognised was that flying was not about a Parmeshwar
Godrej jetting over to Los Angeles to attend Richard Gere's stepson's graduation
ceremony. It was about a Sivaramakrishnan from Coimbatore jetting over to Los Angeles
to crack a computer server breakdown problem.
To make air travel more affordable, the committee has recommended that the taxes,
excise as well as sales tax be brought down. Taxes on aviation turbine fuel make up 45
per cent of the fuel cost. Nowhere in the world are taxes on aviation turbine fuel as high.
If the rate of taxes are brought down to international levels, the cost of air travel will
come down by 25 per cent. Sounds too good to be true ! The catch is that Rudi has to
convince the cash-strapped state Governments to cut sales tax. We know how the
proposal to implement the uniform value added tax system was scuttled by these same
state governments.
Another major recommendation of the committee is that foreign airlines be permitted to
pick up a 49 per cent equity stake in the domestic and international scheduled air
transport services. To ensure that underworld elements like Dawood Ibrahim don't invest
in these airlines, the investments will have to be approved by Foreign Investment
Promotion Board and not come in through the foreign direct investment route, as had
happened earlier. That apart, the foreign investors will also bring in their experience,
managerial and technical talent, which the Indian operators would gain from as domestic
airlines will now be allowed to fly internationally.
Regarding privatisation of Indian Airlines and Air India and the likely transfer of their
management to strategic private investors, the committee has recommended that the
Government may consider placement of shares of the two airlines with domestic financial
institutions and foreign institutional investors.
The committee has also recommended divesting the Government's stake in Pawan Hans
Helicopter Ltd and, thereafter, go for an initial public offering (IPO).
There are 125 airports in the country out of which just about 10 are profitable. Not every
airport can be run profitably, but most of them can. The committee wants the government
to privatise these air ports. The committee has suggested that Mumbai and Delhi airports
be privatised first which can then set standards for the future.
Airline operation in certain routes like the North East are financially non-viable
propositions. However, while the Parmeshwar Godrejs need not have to jet over to the
North East, the Svaramakrishnans need to. Hence, these routes also need to be serviced
by the airlines.
To this end, the committee has called for the creation of an Essential Air Services Fund to
provide Government subsidy support and to be supplemented by a sector specific cess of
5 per cent on the air fare along with the proceeds from the privatisation of airports. These
funds will be available for aviation activities in non-viable areas like the North East.
After receiving the report, Mr Rudi told newspersons that the recommendations of the
committee would help the Government in coming up with a new civil aviation policy.
"We hope to have the policy ready before the Parliament by January.' he said.
Mr Rudi deserves our best wishes. Only, he needs to be a bit careful of the booby traps,
land mines and quick sand that lie ahead.