2016: For aviation sector, new year heralds business in smaller cities

In the new year, airlines will look forward to connecting smaller cities.
In 2016, the government came up with its first ever civil aviation policy, with an emphasis on connecting regional destinations. Industry insiders say the policy could be finetuned in 2017 to help both airlines and customers.

The National Civil Aviation Policy (NCAP) proposes initiatives for new airports, a separate set of regulations for helicopters, and a boost for skill development.

It wants every Indian to fly at least once a year with a fare cap of Rs 2,500 for a one-hour flight. A keenly awaited announcement was about the controversial 5/20 rule, which said a domestic player must have completed five years and run a fleet of 20 aircraft to be eligible to start foreign services, and as expected, it was scrapped but not to the satisfaction of new players.

The government overruled the objections of old players like Air India, SpiceJet and IndiGo, but did not completely go ahead and appease new players like Vistara and AirAsia India, waiting in the wings.

Now, a domestic airline can fly overseas any time if it deploys 20 planes or 20% of their total capacity, whichever is higher, for domestic operations. The change in the rule will not result in immediate starting of foreign flights by any existing Indian carrier, and some still feel the rule is not forward looking.

One of the main challenges before the Ministry of Civil Aviation (MoCA) will be the kick-starting of the Regional Connectivity Scheme or UDAN in January. Domestic players have reservations about the idea of a cess on metro routes to fund flights to unserved and underserved destinations.

Who’s doing well
While SpiceJet is leading the pack on seat occupancy, clocking more than 90% for the past 19 months, IndiGo continued to be the market leader. IndiGo, which turned into a listed company last year, registered a market share of more than 40% in the past three months.

The account books of some airlines will be in good shape, but regional players will have to tread a cautious path. A regional airline, Bengaluru-based Air Pegasus, has not been able to operate since August because of financial constraints.

Aviation players expect the new year to be positive, but also want the government to chip in with concessions and incentives.

The first 11 months of 2016 saw 903.36 lakh people flying, against 810.91 lakh in 2015. In 2014, the number was 673.83 lakh.