Propelled by the consistent growth of Indian economy, the civil aviation industry in India has seen phenomenal growth in the past decade. The Indian civil aviation industry is ranked 9th in the world and has grown about 18%. The surge in domestic air transport in recent years has resulted in this unprecedented growth of the sector. As per government records, around 29.8 million passengers travelled to/from India in 2008. As per the growth trends, this figure is expected to go to around 50 million passengers by 2015. In 2011, a 17% growth in air traffic has been reported. However, despite this growth, rising cost of jet fuel, three crashes and fake licenses with pilots have cast doubt on the industry.
Air travel in India originated in 1912 with a flight between Karachi and Delhi. This flight was started by India State Air Services and Imperial Airways and was the extension of London-Karachi flight of Imperial Airways. The first Indian airline was Tata Airlines, found by JRD Tata in 1932. Initially the airline handled mail services between Karachi, Bombay and Madras. In 1938, Delhi and Colombo were also added to the services and the airline was renamed Tata Air Services. In July 1946, Tata Air Services was made a public limited company and was named Air India, which still operates today. In 1947, at the time of independence, there were a total of nine companies in air transport, moving both passengers and cargo. These companies were later nationalized under the Air Corporations Act of 1953.
In 1948, the government formed a joint venture company with Air India, called Air India International Limited. The company started operations with a capital of Rs. 2 crore ($406,000 USD) and fleet of three Lockheed-Martin Constellation aircraft. The first flight of this joint venture company took off on June 8, 1948, from Mumbai to London. Civil aviation in India was dominated by the government airlines until the 1990s. However, after the government adopted open sky policy in April 1990, private operators came back on the scene. The policy allowed air taxi operators to operate flights from any airport and decide their own schedule, cargo and fares.
Though the open-sky policy allowed private participation in the sector, it did not allow foreign direct investment. No foreign airline could directly or indirectly hold equity in any domestic airline company. By 1995, more than 10% of domestic air traffic was serviced by the private aviation companies. Today, private players dominate the civil aviation in India with more than 70% share. The operators have made air transport affordable with introduction of low cost carriers. They have made a significant contribution in increasing air traffic.
To grow and expand the civil aviation sector in the country, while ensuring safety and security is the main objective of the Ministry of Civil Aviation. The ministry is responsible for the development of civil aviation policy. It formulates and implements policies and programs at national level for the sector. The ministry oversees development of new airports, maintenance of existing airports and air traffic control. The official vision of the ministry is to “enable the people to have access to safe, secure, sustainable and affordable air connectivity services with world-class civil aviation infrastructure.”
Attached Bodies or Autonomous Bodies
Directorate General of Civil Aviation (DGCA)
The Directorate General of Civil Aviation is the regulatory body for civil aviation in the country. DGCA oversees safety and is also responsible for promoting and developing efficient and sustainable air transport through formulation and ensuring compliance of civil air regulations. It coordinates all regulatory functions with International Civil Aviation Organization (ICAO), a specialized agency of the United Nations.
The government is contemplating establishing a Civil Aviation Authority (CAA) in place of DGCA. CAA will look into economic regulation, consumer protection and environment regulations, in addition to the safety functions of DGCA.
Airports Authority of India (AAI)
The Airport Authority of India was formed on April 1, 1995, by merging International Airports Authority of India and National Airports Authority. AAI operates Communication Navigational Services and Air Traffic Management facilities at 142 airports across the country. The main functions of AAI include developing, managing and upgrading passenger terminals and cargo terminals. Other infrastructure such as runways, taxiways are also developed and managed by AAI.
Pawan Hans Helicopters Limited
Pawan Hans Helicopter Limited (PHHL) provides helicopter services to the oil sector for offshore exploration. It connects the remote and hilly areas to the main cities and also provides tourist services. PHHL has a capital of Rs. 112.75 crore ($22.94 million USD), out of which Rs. 89.06 crore has been contributed by the government of India and the remaining by Oil and Natural Gas Corporation (ONGC). The company has an ISO 14001 and ISO 18001 certification. The company is based in New Delhi.
Formerly called the National Aviation Company of India, Air India Limited was set up on March 30, 2007, by merging two public sector airlines – Air India and Indian Airlines. The company is fully owned by the Indian government. The two companies were merged together ostensibly strengthen the business. NACIL was renamed Air India Limited on November 24, 2010. Air India Limited has seven fully owned subsidiaries. These include
Hotel Corporation of India Limited, Air India Charters Limited, Air India Air Transport Services Limited, Air India Engineering Services Limited, Airlines Allied Services Limited, Vayudoot Limited and IAL Airport Services Limited.
The Hotel Corporation of India (HCI)
HCI was set up in 1971. The company provides catering services in the flights operated by Air India and also to the hotels within the vicinity of the airports. The Air India Charters Limited started Air India Express, which is a low cost airline providing services to and from Southeast Asia and the Middle East in April 2005. Air India Air Transport Services Limited handles the ground services and Air India Engineering Services providing engineering services to airlines. Airline Allied Services Limited was especially formed for operating the B737 Indian Airlines’ aircraft in tourist areas. Airlines Allied Services has also started freight operations recently. The merger of Air India and Indian Airlines was heavily criticized.
Bureau of Civil Aviation Security (BCAS)
Bureau of Civil Aviation Security is a regulatory and monitoring authority. It is responsible for security at all civil airports of the country. BCAS was initially set up as a cell of DGCA in 1978; but was declared an independent organization from April 1, 1987. The main function of BCAS is to ensure security at all civil airports and adhere to the National Aviation Security Programme (AVSEC) and international agreements such as IATA, ICPO and ICAO. The Commissioner of Security of Civil Aviation is the head of BCAS. It has offices in Delhi Mumbai, Kolkata and Chennai.
BCAS issues guidelines to states and Union Territories, police, airport authorities and CISF to adopt measures to prevent terrorist attacks or to handle any other security threats. The bureau coordinates with international agencies like IATA, ICPO, INTERPOL and ICAO to ensure the country is meeting international safety standards.
Commission of Railway Safety (CRS)
The Commission of Railway Safety functions under the administrative control of the Ministry of Civil Aviation. CRS mainly deals with railway safety. CRS also conducts regular audits and investigations and advises officials on railway safety. It directs and cautions the railways officials through. Any new railway line that is opened for traffic is investigated by CRS to ensure it conforms to the safety guidelines laid down by the Ministry of Railways. The commission also conducts investigations and enquiries of any serious rail accident in the country and makes recommendations for improving safety. CRS was earlier working as the inspectorate under the Railways Board but was separated in 1941 to be made into an independent authority. It was brought under the Ministry of Civil Aviation in 1967. CRS is headquartered in Lucknow and is headed by Chief Commissioner of Railway Safety. He is also the Principal Technical Adviser to the government of India on all matters related to CRS.
Indira Gandhi Rashtriya Uran Akademi (IGRUA)
Indira Gandhi Rashtriya Uran Akademi was set up in 1986 at Fursatganj in Rai Bareilly District of Uttar Pradesh in 1986. The late Rajiv Gandhi, who was then prime minister of India at the time, founded it. The Akademi was established to improve flying standards and to facilitate ground training of commercial pilots of the country. Akademi’s main objective is to “improve the Flying Training standards in the Civil Aviation Industry and to impart Line Oriented Flying Training of International Standards, as per International Civil Aviation Organization (ICAO) norms.”
The Akademi is a school of training of commercial pilots and issuing licenses to them. It was initially set up to train 40 pilots in a year. However, due to the growth of the civil aviation sector in the country and increase in the demand of commercial pilots, the Akademi is upgrading facilities to train about 100 pilots per year. By December 2010, it had trained 643 commercial pilots. The management of the Akademi was contracted by the CAE Flight Training (India) Private Limited in February 2008 for a period of 10 years.
Airports Economic Regulatory Authority of India (AERA)
The Airports Economic Regulatory Authority of India was set up in May 2009 to fix, approve and periodically review tariffs for aeronautical services in India. It also decides upon the user fee that is charged by the service provider for airport development and services. AERA consists of a chairman and two other members who are appointed by the central government.
Aero Club of India (ACI)
Aero Club of India is the apex body of all aero-sports organization of India. These include all the flying clubs, gliding clubs and any other aero sports club in the country. It was set up in 1927 and registered under the Companies Act 1956. There are about 22 flying clubs that are members of ACI. All these clubs, along with ACI are non-profit organizations that impart basic pilot training and also train aircraft maintenance engineers. ACI also promoted aero-sports in the country through its member clubs. It is also the India representative of the Federation Aeronautique Internationale (FAI), headquartered in Switzerland, the world body for making rules and enforcing them for all aero-sports. ACI is provided grants by the government for developing aerosports in the country and also for providing equipments for imparting basic flying training.
The government of India’s only airline – Air India – has been in a financial mess for several years now. The National Airline last reported profit in 2003-04. Losses have mounted since then. The merger of Air India and Indian Airlines did not improve the situation. In fact, losses increased. Air India has accumulated losses of over RS. 1100 crore ($223.61 million) and has a market share of only 18%. As per the Strategic Plan of the Civil Ministry, it seeks to “wipe out the current losses amounting and make it a genuinely profit making company both operationally and financially by 2014.”
According to the Comptroller and Auditor General report, Air India’s finances got in a mess due to purchasing aircrafts through debt. Air India had proposed acquisition of 28 aircrafts, which included 10 long range and 18 short-range aircrafts. In 2004, under the directive of the civil aviation ministry who was then headed by the then civil aviation minister Praful Patel, the Airline was asked to propose acquisition of 68 aircrafts. Air India had been mounting huge losses and most of the aircraft acquisitions were on debt that pushed the Airline further into losses. Indian Airlines also placed an order for 43 aircrafts that included 97% debt component.
Most of the planned outlay of the ministry goes into Air India Limited. In year 2011-12, out of the total Annual Plan outlay of RS. 9071 crore ($1.84 billion), RS. 5749 crore ($1.17 billion) has been earmarked for Air India Limited. The next largest allotment, RS. 2774 crore ($563.22 million), went to the Airport Authority of India.
Controversies
The Disastrous Indian Airlines-Air India Merger
The merger of the two airlines has been widely criticized. The Ministry of Civil Aviation was found responsible as the merger was completed on its watch. After being merged, the company reported losses every year: RS. 2226 crore ($451.93 million USD) in 2007-08; a loss of RS. 7189 crore ($1.46 billion USD) in 2008-09; and RS. 5551 crore ($1.13 billion USD) in 2009-10. The company’s estimated loss for 2010-11 is expected to be RS. 6994 crore ($1.42 billion USD).
CAG Blames Ministry for AI Mess (by Surajeet Das Gupta & Mihir Mishra, Business Standard)
The Unfriendly Skies
Many Indian airlines have recently been excoriated for flouting safety norms. Fake pilot licenses and pilots caught drunk have been some of the major controversies surrounding civil aviation in India. The investigative agencies in the country have uncovered many fake pilot scams and are currently in a process of verifying all currently licensed pilots. Drunken pilots are also a major worry. There have several recent cases in which the pilots have been caught flying while inebriated. The Directorate General of Civil Aviation (DGCA) has also recently mentioned that most airlines are unsafe, especially the financially crippled airlines such as Air India and Kingfisher.
Fake Pilot Scam: Flying on a Wing and a Prayer (by Saurabh Sinha, Times of India)
India May have 4000 Fake Pilots (NDTV)
DGCA May Make Testing Mandatory (by Manju V, Times of India)
DGCA Pulls up Airlines over Safety (Deccan Herald)
Corruption in the Air
Like other sectors of the Indian polity, corruption at various levels has found roots in India’s civil aviation sector. The fake pilot licenses scam has uncovered a nexus of corrupt individuals in training schools and government agencies. The former civil aviation minister Praful Patel has also faced allegations for corruption after Canadian media reported that he may have been paid about $250,000 for a security contract from Air India.
Indian Opposition Urges Inquiry Over Bribery Case (by Stephanie Nolen, Globe and Mail)
India Finds Corruption in Fast-Growing Aviation Industry (by Heather Timmons, New York Times)
Patel Urges PM to Intervene in Aviation Graft Slur (Times of India)
Is it time to close Air India?
It’s hard to find anyone these days who has a kind word to say about Air India. Even amongst national airlines, which have historically been poorly run, Air India stands out for its ineptitude. Many Indians see the airline in the same light as Delhi’s Ashoka Hotel, the last vestiges of the license Raj era, when it really didn’t matter whether or not government-owned companies made money.
Pro: Closing Air India
A recent Reuters editorial argued that if the airline continues to lose $122 million every month, then there is little point in continuing to underwrite the carrier. Columnist Jeff Glekin further argues that if Air India continues to remain in business, the only thing it will do is keep the price of airline tickets artificially low, which will further hurt the already beleaguered Indian private carriers that are also losing money every month, although nowhere near $122 million.
Air India Will Disappoint with the 787s (Moneylife)
Air India Needs Structural Reform Not Possible Under State Ownership (Economic Times)
Indian Airlines Get the Wrong Help (by Jeff Glekin, Reuters)
Anti Closing Air India
It’s difficult to articulate any logical reason why air India should remain in business. The only argument being made these days is a sentimental one. Alternately, politicians like Former Civil Aviation Minister Vayalar Ravi, who when questioned by an NDTV about whether closing Air India would be best for the country, see darker forces at work. “Some Western interests are trying for this. I will not succumb to the pressure of the Western interests. Somebody wants Air India to go away, sorry I will not do that.” In a clip on a rival network, he qualified his stance somewhat, saying that said Western interests wanted to drive down the value of Air India and then purchase it. Ravi never did specifically name said Western interests.
Will Not Let Air India Go Away (NDTV)
Should Govt Sell Off Striking Air India? (by Debasish Roy, Economic Times)
5 FAQs about Foreign Investment in Indian Airlines (by Sandeep Phukan, NDTV)
FDI in Foreign Carriers in Domestic Airlines
The government of India is contemplating allowing foreign carriers to have a stake in domestic airlines. The government has agreed to draft a cabinet note proposing 49% cap on FDI by foreign carriers in domestic airlines. At present, the government allows 49% FDI in Indian carriers by non-airline entities. Previously, the Ministry of Civil Aviation had proposed a 24% cap on the FDI by foreign carriers. The final decision will be made in late May. Many foreign airlines are reportedly worried that even if they are permitted to invest in Indian Airlines up to 49%, they will not be given commensurate operational control.
FDI in Aviation to Benefit SpiceJet Most: Angel Broking (Moneycontrol.com)
India to Allow FDI in Aviation, Airlines Welcome Move (Economic Times)
Kingfisher Leads Aviation Plunge In Bourses on Talk of FDI Being Deferred (by Nivedita Ganguly and Anjana Chandramoul, Hindu Businessline)
Praful Patel
Praful Patel is the most controversial Civil Aviation minister to date. It was under his term that the controversial merger of Indian Airlines and Air India was carried out. Further, acquisition of aircrafts by Indian Airlines and Air India, which was done under the direction of the Civil Aviation ministry during his term, has also been questioned. The CAG report has pointed out that the aircraft acquisition done by Indian Airlines and Air India mostly through debt sent the entities into financial muddle and is one of the major reasons for the mounting losses. Before he took over as the minister, Air India was registering profit (in 2003-04). However, now Air India has accumulated losses of over RS. 110 billion and is under debt of more than RS. 400 billion. Further, allegations have also been made against Patel for not securing the profitable routes for the National Airlines. He has also been accused by the Canadian Media for accepting a bribe of about $250,000 for a security contract from Air India. Patel represents the Bhandara-Gondia parliamentary constituency in the Lok Sabha. He is a member of Nationalist Congress Party and is currently the Union Cabinet Minister of Heavy Industries and Public Enterprises. He was the Union Civil Aviation Minister from May 2004 to January 2011.
- Table of Contents
- Overview
- History
- What it Does
- Where Does the Money Go
- Controversies
- Debate
- Suggested Reforms
- Former Directors
- Comments
- Leave a comment
Ministry of Civil Aviation
Propelled by the consistent growth of Indian economy, the civil aviation industry in India has seen phenomenal growth in the past decade. The Indian civil aviation industry is ranked 9th in the world and has grown about 18%. The surge in domestic air transport in recent years has resulted in this unprecedented growth of the sector. As per government records, around 29.8 million passengers travelled to/from India in 2008. As per the growth trends, this figure is expected to go to around 50 million passengers by 2015. In 2011, a 17% growth in air traffic has been reported. However, despite this growth, rising cost of jet fuel, three crashes and fake licenses with pilots have cast doubt on the industry.
Air travel in India originated in 1912 with a flight between Karachi and Delhi. This flight was started by India State Air Services and Imperial Airways and was the extension of London-Karachi flight of Imperial Airways. The first Indian airline was Tata Airlines, found by JRD Tata in 1932. Initially the airline handled mail services between Karachi, Bombay and Madras. In 1938, Delhi and Colombo were also added to the services and the airline was renamed Tata Air Services. In July 1946, Tata Air Services was made a public limited company and was named Air India, which still operates today. In 1947, at the time of independence, there were a total of nine companies in air transport, moving both passengers and cargo. These companies were later nationalized under the Air Corporations Act of 1953.
In 1948, the government formed a joint venture company with Air India, called Air India International Limited. The company started operations with a capital of Rs. 2 crore ($406,000 USD) and fleet of three Lockheed-Martin Constellation aircraft. The first flight of this joint venture company took off on June 8, 1948, from Mumbai to London. Civil aviation in India was dominated by the government airlines until the 1990s. However, after the government adopted open sky policy in April 1990, private operators came back on the scene. The policy allowed air taxi operators to operate flights from any airport and decide their own schedule, cargo and fares.
Though the open-sky policy allowed private participation in the sector, it did not allow foreign direct investment. No foreign airline could directly or indirectly hold equity in any domestic airline company. By 1995, more than 10% of domestic air traffic was serviced by the private aviation companies. Today, private players dominate the civil aviation in India with more than 70% share. The operators have made air transport affordable with introduction of low cost carriers. They have made a significant contribution in increasing air traffic.
To grow and expand the civil aviation sector in the country, while ensuring safety and security is the main objective of the Ministry of Civil Aviation. The ministry is responsible for the development of civil aviation policy. It formulates and implements policies and programs at national level for the sector. The ministry oversees development of new airports, maintenance of existing airports and air traffic control. The official vision of the ministry is to “enable the people to have access to safe, secure, sustainable and affordable air connectivity services with world-class civil aviation infrastructure.”
Attached Bodies or Autonomous Bodies
Directorate General of Civil Aviation (DGCA)
The Directorate General of Civil Aviation is the regulatory body for civil aviation in the country. DGCA oversees safety and is also responsible for promoting and developing efficient and sustainable air transport through formulation and ensuring compliance of civil air regulations. It coordinates all regulatory functions with International Civil Aviation Organization (ICAO), a specialized agency of the United Nations.
The government is contemplating establishing a Civil Aviation Authority (CAA) in place of DGCA. CAA will look into economic regulation, consumer protection and environment regulations, in addition to the safety functions of DGCA.
Airports Authority of India (AAI)
The Airport Authority of India was formed on April 1, 1995, by merging International Airports Authority of India and National Airports Authority. AAI operates Communication Navigational Services and Air Traffic Management facilities at 142 airports across the country. The main functions of AAI include developing, managing and upgrading passenger terminals and cargo terminals. Other infrastructure such as runways, taxiways are also developed and managed by AAI.
Pawan Hans Helicopters Limited
Pawan Hans Helicopter Limited (PHHL) provides helicopter services to the oil sector for offshore exploration. It connects the remote and hilly areas to the main cities and also provides tourist services. PHHL has a capital of Rs. 112.75 crore ($22.94 million USD), out of which Rs. 89.06 crore has been contributed by the government of India and the remaining by Oil and Natural Gas Corporation (ONGC). The company has an ISO 14001 and ISO 18001 certification. The company is based in New Delhi.
Formerly called the National Aviation Company of India, Air India Limited was set up on March 30, 2007, by merging two public sector airlines – Air India and Indian Airlines. The company is fully owned by the Indian government. The two companies were merged together ostensibly strengthen the business. NACIL was renamed Air India Limited on November 24, 2010. Air India Limited has seven fully owned subsidiaries. These include
Hotel Corporation of India Limited, Air India Charters Limited, Air India Air Transport Services Limited, Air India Engineering Services Limited, Airlines Allied Services Limited, Vayudoot Limited and IAL Airport Services Limited.
The Hotel Corporation of India (HCI)
HCI was set up in 1971. The company provides catering services in the flights operated by Air India and also to the hotels within the vicinity of the airports. The Air India Charters Limited started Air India Express, which is a low cost airline providing services to and from Southeast Asia and the Middle East in April 2005. Air India Air Transport Services Limited handles the ground services and Air India Engineering Services providing engineering services to airlines. Airline Allied Services Limited was especially formed for operating the B737 Indian Airlines’ aircraft in tourist areas. Airlines Allied Services has also started freight operations recently. The merger of Air India and Indian Airlines was heavily criticized.
Bureau of Civil Aviation Security (BCAS)
Bureau of Civil Aviation Security is a regulatory and monitoring authority. It is responsible for security at all civil airports of the country. BCAS was initially set up as a cell of DGCA in 1978; but was declared an independent organization from April 1, 1987. The main function of BCAS is to ensure security at all civil airports and adhere to the National Aviation Security Programme (AVSEC) and international agreements such as IATA, ICPO and ICAO. The Commissioner of Security of Civil Aviation is the head of BCAS. It has offices in Delhi Mumbai, Kolkata and Chennai.
BCAS issues guidelines to states and Union Territories, police, airport authorities and CISF to adopt measures to prevent terrorist attacks or to handle any other security threats. The bureau coordinates with international agencies like IATA, ICPO, INTERPOL and ICAO to ensure the country is meeting international safety standards.
Commission of Railway Safety (CRS)
The Commission of Railway Safety functions under the administrative control of the Ministry of Civil Aviation. CRS mainly deals with railway safety. CRS also conducts regular audits and investigations and advises officials on railway safety. It directs and cautions the railways officials through. Any new railway line that is opened for traffic is investigated by CRS to ensure it conforms to the safety guidelines laid down by the Ministry of Railways. The commission also conducts investigations and enquiries of any serious rail accident in the country and makes recommendations for improving safety. CRS was earlier working as the inspectorate under the Railways Board but was separated in 1941 to be made into an independent authority. It was brought under the Ministry of Civil Aviation in 1967. CRS is headquartered in Lucknow and is headed by Chief Commissioner of Railway Safety. He is also the Principal Technical Adviser to the government of India on all matters related to CRS.
Indira Gandhi Rashtriya Uran Akademi (IGRUA)
Indira Gandhi Rashtriya Uran Akademi was set up in 1986 at Fursatganj in Rai Bareilly District of Uttar Pradesh in 1986. The late Rajiv Gandhi, who was then prime minister of India at the time, founded it. The Akademi was established to improve flying standards and to facilitate ground training of commercial pilots of the country. Akademi’s main objective is to “improve the Flying Training standards in the Civil Aviation Industry and to impart Line Oriented Flying Training of International Standards, as per International Civil Aviation Organization (ICAO) norms.”
The Akademi is a school of training of commercial pilots and issuing licenses to them. It was initially set up to train 40 pilots in a year. However, due to the growth of the civil aviation sector in the country and increase in the demand of commercial pilots, the Akademi is upgrading facilities to train about 100 pilots per year. By December 2010, it had trained 643 commercial pilots. The management of the Akademi was contracted by the CAE Flight Training (India) Private Limited in February 2008 for a period of 10 years.
Airports Economic Regulatory Authority of India (AERA)
The Airports Economic Regulatory Authority of India was set up in May 2009 to fix, approve and periodically review tariffs for aeronautical services in India. It also decides upon the user fee that is charged by the service provider for airport development and services. AERA consists of a chairman and two other members who are appointed by the central government.
Aero Club of India (ACI)
Aero Club of India is the apex body of all aero-sports organization of India. These include all the flying clubs, gliding clubs and any other aero sports club in the country. It was set up in 1927 and registered under the Companies Act 1956. There are about 22 flying clubs that are members of ACI. All these clubs, along with ACI are non-profit organizations that impart basic pilot training and also train aircraft maintenance engineers. ACI also promoted aero-sports in the country through its member clubs. It is also the India representative of the Federation Aeronautique Internationale (FAI), headquartered in Switzerland, the world body for making rules and enforcing them for all aero-sports. ACI is provided grants by the government for developing aerosports in the country and also for providing equipments for imparting basic flying training.
The government of India’s only airline – Air India – has been in a financial mess for several years now. The National Airline last reported profit in 2003-04. Losses have mounted since then. The merger of Air India and Indian Airlines did not improve the situation. In fact, losses increased. Air India has accumulated losses of over RS. 1100 crore ($223.61 million) and has a market share of only 18%. As per the Strategic Plan of the Civil Ministry, it seeks to “wipe out the current losses amounting and make it a genuinely profit making company both operationally and financially by 2014.”
According to the Comptroller and Auditor General report, Air India’s finances got in a mess due to purchasing aircrafts through debt. Air India had proposed acquisition of 28 aircrafts, which included 10 long range and 18 short-range aircrafts. In 2004, under the directive of the civil aviation ministry who was then headed by the then civil aviation minister Praful Patel, the Airline was asked to propose acquisition of 68 aircrafts. Air India had been mounting huge losses and most of the aircraft acquisitions were on debt that pushed the Airline further into losses. Indian Airlines also placed an order for 43 aircrafts that included 97% debt component.
Most of the planned outlay of the ministry goes into Air India Limited. In year 2011-12, out of the total Annual Plan outlay of RS. 9071 crore ($1.84 billion), RS. 5749 crore ($1.17 billion) has been earmarked for Air India Limited. The next largest allotment, RS. 2774 crore ($563.22 million), went to the Airport Authority of India.
Controversies
The Disastrous Indian Airlines-Air India Merger
The merger of the two airlines has been widely criticized. The Ministry of Civil Aviation was found responsible as the merger was completed on its watch. After being merged, the company reported losses every year: RS. 2226 crore ($451.93 million USD) in 2007-08; a loss of RS. 7189 crore ($1.46 billion USD) in 2008-09; and RS. 5551 crore ($1.13 billion USD) in 2009-10. The company’s estimated loss for 2010-11 is expected to be RS. 6994 crore ($1.42 billion USD).
CAG Blames Ministry for AI Mess (by Surajeet Das Gupta & Mihir Mishra, Business Standard)
The Unfriendly Skies
Many Indian airlines have recently been excoriated for flouting safety norms. Fake pilot licenses and pilots caught drunk have been some of the major controversies surrounding civil aviation in India. The investigative agencies in the country have uncovered many fake pilot scams and are currently in a process of verifying all currently licensed pilots. Drunken pilots are also a major worry. There have several recent cases in which the pilots have been caught flying while inebriated. The Directorate General of Civil Aviation (DGCA) has also recently mentioned that most airlines are unsafe, especially the financially crippled airlines such as Air India and Kingfisher.
Fake Pilot Scam: Flying on a Wing and a Prayer (by Saurabh Sinha, Times of India)
India May have 4000 Fake Pilots (NDTV)
DGCA May Make Testing Mandatory (by Manju V, Times of India)
DGCA Pulls up Airlines over Safety (Deccan Herald)
Corruption in the Air
Like other sectors of the Indian polity, corruption at various levels has found roots in India’s civil aviation sector. The fake pilot licenses scam has uncovered a nexus of corrupt individuals in training schools and government agencies. The former civil aviation minister Praful Patel has also faced allegations for corruption after Canadian media reported that he may have been paid about $250,000 for a security contract from Air India.
Indian Opposition Urges Inquiry Over Bribery Case (by Stephanie Nolen, Globe and Mail)
India Finds Corruption in Fast-Growing Aviation Industry (by Heather Timmons, New York Times)
Patel Urges PM to Intervene in Aviation Graft Slur (Times of India)
Is it time to close Air India?
It’s hard to find anyone these days who has a kind word to say about Air India. Even amongst national airlines, which have historically been poorly run, Air India stands out for its ineptitude. Many Indians see the airline in the same light as Delhi’s Ashoka Hotel, the last vestiges of the license Raj era, when it really didn’t matter whether or not government-owned companies made money.
Pro: Closing Air India
A recent Reuters editorial argued that if the airline continues to lose $122 million every month, then there is little point in continuing to underwrite the carrier. Columnist Jeff Glekin further argues that if Air India continues to remain in business, the only thing it will do is keep the price of airline tickets artificially low, which will further hurt the already beleaguered Indian private carriers that are also losing money every month, although nowhere near $122 million.
Air India Will Disappoint with the 787s (Moneylife)
Air India Needs Structural Reform Not Possible Under State Ownership (Economic Times)
Indian Airlines Get the Wrong Help (by Jeff Glekin, Reuters)
Anti Closing Air India
It’s difficult to articulate any logical reason why air India should remain in business. The only argument being made these days is a sentimental one. Alternately, politicians like Former Civil Aviation Minister Vayalar Ravi, who when questioned by an NDTV about whether closing Air India would be best for the country, see darker forces at work. “Some Western interests are trying for this. I will not succumb to the pressure of the Western interests. Somebody wants Air India to go away, sorry I will not do that.” In a clip on a rival network, he qualified his stance somewhat, saying that said Western interests wanted to drive down the value of Air India and then purchase it. Ravi never did specifically name said Western interests.
Will Not Let Air India Go Away (NDTV)
Should Govt Sell Off Striking Air India? (by Debasish Roy, Economic Times)
5 FAQs about Foreign Investment in Indian Airlines (by Sandeep Phukan, NDTV)
FDI in Foreign Carriers in Domestic Airlines
The government of India is contemplating allowing foreign carriers to have a stake in domestic airlines. The government has agreed to draft a cabinet note proposing 49% cap on FDI by foreign carriers in domestic airlines. At present, the government allows 49% FDI in Indian carriers by non-airline entities. Previously, the Ministry of Civil Aviation had proposed a 24% cap on the FDI by foreign carriers. The final decision will be made in late May. Many foreign airlines are reportedly worried that even if they are permitted to invest in Indian Airlines up to 49%, they will not be given commensurate operational control.
FDI in Aviation to Benefit SpiceJet Most: Angel Broking (Moneycontrol.com)
India to Allow FDI in Aviation, Airlines Welcome Move (Economic Times)
Kingfisher Leads Aviation Plunge In Bourses on Talk of FDI Being Deferred (by Nivedita Ganguly and Anjana Chandramoul, Hindu Businessline)
Praful Patel
Praful Patel is the most controversial Civil Aviation minister to date. It was under his term that the controversial merger of Indian Airlines and Air India was carried out. Further, acquisition of aircrafts by Indian Airlines and Air India, which was done under the direction of the Civil Aviation ministry during his term, has also been questioned. The CAG report has pointed out that the aircraft acquisition done by Indian Airlines and Air India mostly through debt sent the entities into financial muddle and is one of the major reasons for the mounting losses. Before he took over as the minister, Air India was registering profit (in 2003-04). However, now Air India has accumulated losses of over RS. 110 billion and is under debt of more than RS. 400 billion. Further, allegations have also been made against Patel for not securing the profitable routes for the National Airlines. He has also been accused by the Canadian Media for accepting a bribe of about $250,000 for a security contract from Air India. Patel represents the Bhandara-Gondia parliamentary constituency in the Lok Sabha. He is a member of Nationalist Congress Party and is currently the Union Cabinet Minister of Heavy Industries and Public Enterprises. He was the Union Civil Aviation Minister from May 2004 to January 2011.
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