'Draft policy is bold and futuristic'

'Draft policy is bold and futuristic'

Amber Dubey

is the Partner and Head of Aerospace and Defence at global consultancy KPMG. In an interview with Furquan Moharkan of Deccan Herald, Dubey says that DGCA should focus on safety issues than playing an accountant’s role while airlines are best left to deal with business issues than getting into complicated compliance issues.

How is this Draft NCAP different from former civil aviation policies?

India never had a comprehensive, transparent and pro-growth aviation policy since 1947.  Many of the decisions, therefore, were ad-hoc and short-term, based on the whims and fancies of the government in power. The Draft National Civil Aviation Policy (NCAP 2016) is crisp, comprehensive, bold and futuristic. It has brought in many long-pending reforms related to airlines, airports, global and domestic connectivity, helicopters, MRO, cargo, ground handling and charter operators.

Unfortunately, the policy is silent on other pending reforms related to DGCA, Air India, Airports Authority of India (AAI) and Air Navigation Services (ANS). One hopes that these will be addressed outside the NCAP since all these are government controlled entities.  The industry has by and large welcomed the NCAP except for a few misgivings.  No policy in the world can please all. Overall NCAP 2016, is likely to set Indian aviation on a high growth path and help us achieve our dream of being number three in the world by 2020 and number one by 2030.  Sounds crazy but it is not a dream if it’s not crazy.

Given that airlines are running on  tight bottomlines, how will the reduced margins impact their profitability?

India’s biggest strength is its population and not individual prosperity. Transportation is a volume game, with low margins. Anything that’s high cost doesn’t sell.  The success of IndiGo and the dramatic revival of SpiceJet from near-death proves this point. Oil prices are expected to stay below $50 per barrel for the next three years.  With per capita incomes rising, increasing value of time and the growing propensity for leisure and tourism will result in more and more Indians taking to flying.

A three to four year period with annual traffic growth rate of 18-20 per cent, will pitchfork India into top leagues. Most airlines are likely to improve their bottomlines. NCAP 2016 will improve bottomlines further with a slew of tax breaks to MRO, cargo, ground handling and ATF.

The 5/20 rule has generated so much controversy, how do you opine on it?

The infamous, discriminatory and anti-competition ‘5/20 Rule’ of 2004, prevents new Indian airlines from flying abroad till they complete five years, and have 20 aircrafts. Probably no country in the world has such a bizarre rule.  A one day old airline from Nepal or Bangladesh can fly unhindered into India tomorrow but an Indian carrier can’t go there for five long years. All carriers that commenced operations after 2004 like Kingfisher, SpiceJet, IndiGo and GoAir suffered due to this. The rule should be abolished with immediate effect. A simpler approach of 1 year/5 aircraft or 2 years/10 aircraft may be adopted, if its outright abolition is politically risky.

Linking abolition of 5/20 Rule to the complicated domestic flying credit (DFC) system should be avoided.  Airlines are best left to deal with business issues than getting into complicated compliance issues like recording, reporting and trading credits.  The proposed DFC monitoring agency, DGCA, should focus on safety issues than playing an accountant’s role.

What more can be done by airline sector in India to make domestic travel more affordable?

There  are many things that Indian arilines companies can do to make travel afforadable. Go in for new fuel efficient aircraft.  Choose route network carefully.  Enhance fuelling at stations that offer low ATF taxes.  Continue looking for options to reduce aircraft weight – eg food trolleys in low cost carriers, which are completely unnecessary.  Develop local Maintenance, Repair and Overhaul (MRO) tie-ups, now that the tax anomalies are being removed.  Work with airports and other stakeholders to reduce ground time – every two to five minutes shaved from a turnaround can help pack in an extra flight per day. Use electronic boarding to reduce processing time, errors and manpower.

Enhance use of aircraft interiors for ads — every rupee gained can help reduce airfares and fill up the aircraft.  Ensure timely payment to lessors, lenders and vendors to bring down service costs. Invest in safety and training — mishaps can cost much more in terms of asset loss, financial penalties, higher insurance premia and loss of brand. Collaborate with other airlines and ground handlers to consolidate ground handling equipment like in the case of telephone towers or bank ATMs — each airline maintaining its own fleet of coaches, tractor-trolleys, staff is sheer duplication and wastage.  Work with the government to reduce the size of security team to be hired mandatorily by each airline — this is another waste of resources that are not allowed to do other non-security duties during idle time.

What more can be done by thegovernment in India to make domestic travel more affordable?

The government has to implement the NCAP in letter and spirit. Provide direct cash subsidy to airlines operating on loss making regional routes and reduce various levies on MRO, ground handling, cargo and MRO as envisaged in the draft NCAP.  Abolish the Route Dispersal Guidelines (RDG). Remote areas under Categories 2 and 2a can also be brought under the Regional Connectivity Scheme (RCS).  Work with industry for skill development on a war footing especially for pilots, engineers and technicians.

How has the advent of low cost regional carriers impacted the aviation sector in India?

The more the merrier.  Each extra players brings in a fresh dose of vibrancy, innovation and competition.  Consumers get more choice and the airfares typically fall.  Not all newcomers may succeed.  Some may become niche players or partner with larger carriers.  Some may die out.  Overall, arrival of new players should be facilitated by MoCA and DGCA, subject to adequate checks about their technical and financial capabilities.

There have been complaints against various regional carriers for mismanaged and terrible services. How can that be resolved?

Passenger complaints can be addressed by way of effective monitoring, time-bound investigations and swift action by DGCA and MoCA.  This will go a long way in establishing trust in the Indian aviation industry, especially for new flyers and foreign tourists.

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