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Government says yes to 6 new airlines, but is India ready to revive aviation sector?

Wednesday, 23 July 2014 - 10:07am IST | Place: Mumbai | Agency: dna webdesk

The aviation ministry headed by Ashok Gajapathi Raju has given thumbs up to six new airlines, approvals for which were pending for a long time. The government has issued No Objection Certificates to the airlines that include Air One, Premier Air, Zexus Air, Turbo Megha, Air Carnival and Zav Airways and the Tata-Singapore Airlines joint venture. Most of these airlines are expected to start operations by the fiscal year end, while the joint venture between Tata and Singapore Airlines might begin by this calendar year end.

Now that the certificate has been obtained, the airlines have to approach the Director-General of Civil Aviation (DGCA) to receive the airline license, which might take up to three months.

Air Asia started flying in India this year. Air One, Premier and Zexus are applying for pan India license, which will make them national carriers. Right now India has eight airlines, and adding six more to them would usher in immense competition in the market. On the one hand, it is expected to bring down airfares substantially. On the other, Indian aviation players will have to up their games, if they have to show higher profits on their books. 

As a report by Mint points out, "the combined losses of existing airlines in India are expected to touch $1.4 billion in the current fiscal year, according to a June report by consultancy firm Centre for Asia Pacific Aviation (Capa). Combined losses for Indian airlines were $1.77 billion in the last fiscal year, while accumulated losses of the last seven years have reached $10.6 billion, Capa said." Indigo is the only profitable airline in India and the others need to start making money too become viable.

If solving the connectivity problem is the primary concern, India needs more airports with efficient infrastructure. One does not need some grand affair, but efficient airports in the Tier 2 and Tier 3 cities which will actually solve connectivity problems. It could boost tourism as well. However, demand might be an important issue the airlines would want to be sure about before commencing service to less well known areas.

As an article in Firstpost says, the government has identified 50 new locations for small airports that could cost Rs 70-80 crore each. But ,"will state governments be asked to share costs of security, water and electricity? And what about traffic potential at remote locations?"

The clearances are the first step in the right direction, but the revival the aviation sector both for consumers and for the service providers is still a long way to go.

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