CAPA lampoons lack of strategy in Indian aviation sector

THE absence of a structured policy to guide India’s aviation sector has kept investors at bay and hurt the country’s airports and airlines, said CAPA India.

In its scathing CAPA India Avition Outlook 2013/14 report, CAPA India stated that the lack of a transparent, Cabinet-approved national aviation policy has “prevented the corporatisation of the sector and has kept many serious investors away from the market”.

CAPA India thus called on the Indian government to introduce an aviation policy within the next six months. Furthermore, the report also urged the Indian government to develop a framework for the allocation of seats and to clarify criteria for the issuing of new airline licences.

Looking ahead, the CAPA India report predicted that the government’s move last year to allow foreign airlines to own up to 49 per cent of Indian carriers has opened the gate to even more foreign interest.

Etihad Airways is set to take a 24 per cent stake in Jet Airways (TTG Asia e-Daily, December 4, 2012), while AirAsia will hold 49 per cent of AirAsia India (TTG Asia e-Daily, February 21, 2013). CAPA India expects more to follow and forecast that foreign airlines would invest in SpiceJet and GoAir within the next half a year.

However, it warned that India’s current aviation policy and regulatory framework might not be “sufficiently robust to absorb the potential impact of foreign airline transactions, alliances and codeshares”.

CAPA India also said that India needed to recognise that ancillaries were part of the airline business model and that airlines should be allowed to innovate and charge fees where appropriate.

The aviation body stated that India’s airlines could derive some US$500 million more a year simply through ancillary charges. CAPA India noted that there would be “sensitivities around unbundling (services)” but that airlines would have to communicate such changes clearly to passengers.

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