This is from Asia Times Online. Goa's leaders may have to pull up their socks and get with it if the state is not to be left behind in the aviation sweepstakes that are underway in its neighbourhood!
--------------------- South Asia Jan 15, 2005 Revolution in the air in India By Indrajit Basu Ask any traveler who has tried to book a flight to or from India during the holiday season between October and February and he will tell you it's almost impossible to get a seat. Domestic flights too are overbooked during this time, when the cooler climate, thrown in with plenty of sun, attracts hoards of tourists and businessmen to India just as an equally large number of wanderlust Indians travel out. But such problems may soon be history, as a mix of policy changes and bilateral pacts with a few countries promise to bring about a revolution in India's civil aviation history. The policy push came in four stages starting from September, when the government granted airlines from nine countries rights to operate a daily service to any two metro cities in India, on a reciprocal basis. The countries are: the UK, Australia, Taiwan, Korea, Kenya, Sweden, Finland, Kyrgyzstan and the Slovak Republic. Soon after, the government cleared an almost 14-year request by the two state-owned airlines, Air-India and Indian Airlines, to expand their fleets. Raising of the foreign investment limit in the local aviation sector from 40% to 49% followed in October. And finally, after the recent bilateral pacts with Sri Lanka and Singapore, and multiple-carrier status for aircraft from India granted by three Association of Southeast Asian Nations countries - Singapore, Malaysia and Thailand - low-cost airlines from these countries were allowed to enter India just as permission to private Indian airlines (with five years' flying experience) was given to fly to all global destinations except the Gulf. This means that in about six months, at least two local carriers - Jet Airways and Sahara Airlines - would be able to operate in key but short-haul destinations such as Singapore, Hong Kong, Bangkok and Kuala Lumpur. Until now, private local airlines were only allowed to operate within the country. Consequently, it is raining planes in India as state-owned and private airlines are expanding their fleets with a vengeance and foreign players are rushing in to grab a share of the Indian aviation pie. Take a look at the foreign carrier interest that has been generated over the past few months. Among the mainline global carriers, the ones that are expanding or have already expanded operation in India include Singapore Airlines, Thai Airways, Malaysian Airlines, Virgin Airways, British Airways, Lufthansa, Cathay Pacific, Austrian Airlines and Qantas. In the budget segment, it was Singapore's Jetstar Asia that first announced entry into India. According to the Travel Agents Association, other overseas no-frills carriers that have started talking to the Indian authorities to enter India by May-June include Singapore-based Tiger Airways and ValuAir, and AirAsia from Malaysia. Even a Kazakhstan-based low-cost carrier and Thailand's Phuket Air has evinced interest in operating out of India. "The Civil Aviation Ministry has reportedly received requests from foreign airlines to operate 1,639 additional services from November 1, 2004, to March 31, 2005," says Kapil Kaul, chief executive officer of the Indian Subcontinent and Middle East wing of the Center for Asia-Pacific Aviation. "The Indian airspace is looking crowded indeed," says Salim Ansari, head of the aviation sector of global travel agency Thomas Cook. The optimism on India's open skies is evident within the country too, with Indian carriers going overboard with fleet expansions and newer entries. Besides existing local domestic carriers such as Indian Airlines, Air Deccan, Jet, Sahara and Jagson, three new airlines are likely to start operations in 2005. These are Vijay Mallya's Kingfisher, Nusli Wadia's Go Airways, and Royal Airways, which is basically a re-launch of ModiLuft - a local carrier that went bust a few years back. And all these carriers will spend about $11 billion over the next five years to add 300 aircraft to the Indian skies. "These are exciting times for the Indian aviation industry," says Kaul, who feels that with "over 325,000 additional seats expected in 2005, up from 275,000 additional seats in 2003-04, India is the fastest growing aviation sector in the world". Kapil believes that Indian aviation is entering a phase that will see the sector taking its most exciting journey for the first time in over five decades. Indeed, the global aviation sector has always complained about the state monopoly in India. Air-India and Indian Airlines, the two state-owned and highly bureaucratic carriers, have traditionally used this monopoly to check flights into India and growth of new Indian carriers by restricting their expansion and blocking potential joint ventures with foreign entities. Simultaneously, political and bureaucratic indecision stymied efforts by the two state airlines to order new aircraft. And even after the aviation sector was opened partially in the early 1990s, which saw restricted entries of a few local airlines, the civil aviation policy generally remained opaque. In the absence of a stated policy, the government's stance on the subject has changed every time a new minister or a bureaucrat has taken charge. The result: with fares in India the highest in the world, domestic airlines carry just about 30% of total air travelers, the foreign airlines carrying the rest. For instance, a typical Delhi-Bangalore round trip costs $410 - the same as it would from Delhi to Singapore. Moreover, despite the fact that India has close to 400 airstrips, airport infrastructure is deplorable in most parts. Even a big and important airport like Mumbai faces regular congestion that causes inordinate flight delays, though it handles less than half the number of flights as, say, Hong Kong. In the new open-skies era, therefore, the biggest beneficiaries would be the country's air travelers. Besides the fact that the days of the mad rush for seats will soon be over, "additional capacity will mean lower ticket prices, though the impact may not be felt for the first few months", says Kaul. But already a price war has broken out. Britain's Virgin Airlines has promised to price an economy-class Delhi-London-Delhi ticket at less than half - at $400 - the current normal rates, while the entry of Malaysian Airlines in the eastern part of the country has seen the price of Kolkata-Singapore-Kolkata fare come down from $400 to about $318. With the entry of Jetstar Asia around the middle of this year, industry sources reckon that the price may crash down to $230. Another segment to gain substantially from the liberalized skies would be aircraft manufacturers. Boeing reckons that of the 300-aircraft shopping list of Indian carriers, more than 200 would be bought or leased by private airlines. Boeing is, in fact, contemplating setting up training and maintenance centers in India so that private carriers don't have to send aircraft and pilots overseas for training. "India plans to spend another $10 billion over the next five years for airport modernization, which could benefit many foreign businesses," says Ansari of Thomas Cook. "This growth will have its trickle-down effect on tourism, jobs and income," adds Kaul. "It is safe to predict that India's air passenger traffic will grow by at least 20% in the next five years to reach a total of 50 million." Nevertheless, protectionism isn't grounded absolutely just yet. The government still does not allow foreign airlines to start joint ventures, and foreign investors say that the limit for foreign equity stakes from sources with no significant airline connections, which has been raised from 40% to 49%, is not "open enough". The biggest constraints in an otherwise promising story is the airport bottleneck. Though airport modernization in 3-5 years features topmost on the government's agenda, it will take a while for the results to take effect. Meanwhile, the crumbling airport infrastructure would make things worse as passenger and aircraft traffic surge, says Luc Establie, sales director of Toulouse-based ATR (Avions de Transport Regional ). Still, India's penchant for opening up its skies seems relentless. Talks began on Thursday between India and the US on a historic open-skies agreement to liberalize aviation between the two countries. Reportedly, India's Civil Aviation Minister Praful Patel and US Transport Secretary Norm Mineta would sign a deal next week that would permit unrestricted air service by airlines of both countries between and beyond one another's territory, eliminating restrictions on how often the carriers can fly, the kind of aircraft they use and the prices they charge. It would replace the 50-year-old agreement between the two that was considered "too restrictive". The biggest advantage of the new deal, say aviation industry sources, would be that it will cut red tape and allow airlines to make commercial decisions with minimal government intervention. Currently, all new flights and schedules have to be cleared by various government authorities in both countries and resultantly, there is just one Indian carrier, Air-India, which flies directly from New York and Chicago. US carriers Delta and Northwest serve the US market in India. The new agreement would also allow other US-based carriers, many of which are on the verge of bankruptcy, to fly from any city in the US to any city in India, while Indian carriers too would get the same chance. However, according to Kaul, the biggest beneficiary of the deal would be Air-India since "no other local airlines have aircraft capable of flying to long-haul destinations like the US". Clearly, even if the country's aviation sector falters somewhat in the short run, air travelers can look forward to far better deals and a plethora of new connections in the months to come. Indrajit Basu is a Kolkata-based equity-analyst-turned-journalist with more than 12 years of experience in business -------------- Ribandar