Tip of the iceberg of aviation crisis

Domestic aviation has not been able to fly in the past decade. Air India has been running in losses for many years, Jet Airways has gone bankrupt, Spice Jet nearly went under and the profits of Indigo Airlines have taken a hit. All this has taken place before the Covid pandemic which has only made things much worse. The reason is that the government has been focussing on improving regional aviation while the opportunity lies in long distance flights.

The cost of AC 2-Tier train travel from Delhi to Bengaluru in an express train is Rs 2,925. In comparison, a one-month ahead air ticket is available at Rs 3,170, which is nearly equal to the AC 2-tier fare. The difference is that AC 2-tier travel takes 2 nights and one day and involves expenditures of food during this period. The cost becomes more when the food expenditure is added. In comparison, air travel from home-to-home takes only about 7 hours. Therefore, air travel is successful both in terms of time and cost. However, short notice air travel becomes less competitive. In that case, air travel may cost Rs 7,000-plus while train travel would cost the same Rs 2,925 if tickets are available. This shows that basically air travel is successful for long distances.

Compare this with medium distance travel, say, between Delhi and Lucknow. AC 2-tier ticket fare is Rs 1,100 while one-month ahead air ticket fare is Rs 1,827. The time taken in home-to-tome rail travel is 10 hours against only 5 hours for air travel. However, train travel can be undertaken during the night while air travel has to be undertaken during the daytime and cuts into working hours. The productive day time is lost in air travel. Thus, medium distance travel is successful by train. Only those reluctant to undertake night travel say for health reasons; or train tickets not being available; or having some urgency to reach the destination may undertake air travel for medium distances.

Another policy being pursued by the government is to improve air connectivity with tourist places like Assam and Andaman Islands. Here the problem is systemic to the tourism sector that is beset with problems of law and order, lack of social cohesion and lack of investment in marketing. Tourism-oriented civil aviation will succeed only if tourism succeeds which shows no signs of happening in the near future.

It appears that these factors have been ignored by various agencies repeatedly. The government had constituted a working group to suggest policies for the expansion of domestic aviation in 2012. The group recommended that subsidies be given to regional aviation. Then the government made a National Civil Aviation Policy after which it started providing subsidies for three years to regional flights. Recently in 2018, Deloitte Consultants suggested expansion of aviation to smaller towns. All these reports have not delivered because an equally efficacious if not better alternative of train travel is available. The improvement of roads in the recent time has made available yet another alternative to air travel for medium and short distances. Travel from Delhi to Dehradun by road or air, for example, would take about the same 4 hours. However, road travel would not require standing in queues at check-in counters, security check, boarding the aircraft and collecting baggage. Thus, the policy of promoting regional civil aviation is a failure and will continue to be so. The government must instead focus on making long distance air travel more convenient. The recent proposal to expand the Indira Gandhi International Airport at Delhi is thus in the right direction. Further, road connectivity to the airports must be improved. The time taken for security check and baggage check-in must be cut. I know of travellers that arrive at airports in London merely 15 minutes before take-off and board the flight seamlessly.

The sinking of Air India into loss is partly due to these structural problems of the domestic aviation sector in the country. However, the loss cannot be explained only by these missteps of the government. Air India has a large portfolio of international flights that continue to be profitable and face no competition from rail or road transport. These international flights have not delivered either. Social media is awash with the state of Air India. The Finology Blog says, "Employee expenses, insurance, and retirement also contributed to the already increasing costs." The Simply Flying blog says, "Massive corruption within the airline and poor management was the prime reason behind the hindrance to Air India's development." An Op-ed on the Runwaygirl Network says it is common to find extremely poor reviews of the airline and that many reviews "highlight customer service issues."

Recently Minister of Civil Aviation Hardeep Singh Puri said with satisfaction that Air India "has not laid off a single employee even as international and domestic carriers have resorted to cost cutting through layoffs." I daresay, this should be a cause for concern rather than for satisfaction. Not laying off surplus staff means that Air India has to bear unnecessary losses that then have to be passed to the hapless citizens of the country. These problems are endemic to the bureaucratic stranglehold on the public sector and Air India is no exception.

The 2018 effort to privatise Air India failed precisely due to the attempt of bureaucracy to hold on to its powers. The government had then offered to sell only 75 per cent controlling shares to the buyer and the bureaucracy wanted to hold on to 25 per cent of the shares. This meant that the bureaucrats would get a seat on the Board of Directors of the privatised company and get a veto that would interfere with the commercial decisions of the private management. It is good that the bureaucracy – though after incurring further losses for another three years – has learnt the lesson and now offered to sell 100 per cent shares. Let us hope that Air India will now be privatised successfully.

There is more to do to promote domestic aviation. The government must improve the road and the metro connectivity to the airports and sort out the kinks in the security checks and other harassments faced by the passengers. These steps could possibly help in jumpstarting regional aviation as well by reducing the time of air travel between Delhi and Lucknow, for example, from present 5 hours to, say, 3 hours.

(The author is former Professor of Economics at IIM, Bengaluru)

(The opinions expressed in this column are those of the writer. The facts and opinions expressed here do not reflect the views of The Hans India)