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Regional connectivity will be the game changer not 5/20

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By Sangeeta Saxena
Hyderabad. 16 March, 2016. When 5/20 which is five years and twenty aircraft to start overseas operations, seemed to rule the roost when it came to getting clarifications on and hoping to see changes in, at the media interaction with Minister for Civil Aviation, Ashok Gajapathi Raju, interestingly took a back seat when the minister said, “ 5/20 will not be a game changer, regional connectivity will. We have received a large number of inputs across the spectrum for reconsidering 5/20. We have had deliberations. Policy finally approved by the government will have no ambiguity on it.”

And the course of the discussions for the afternoon changed. Low penetration is a major issue with the airlines. Domestic ticketing says average middle class Indian buys a ticket once in five years  and the reason is he has no airport close to his city of stay. Affordable fares and regional connectivity is a problem is this. 350 airstrips  are lying unused built from World war II onwards. These are dormant assets and we can revive them as no frills airport and propose to give huge concessions to them.  They will have no levying of excise duty, VAT, service tax, landing and parking charges. The aim is to create a network by connecting these unserved airports to served airports.

 

The icing on the cake will be trying to fix a standard fare of Rs2,500/- for the ticket for a distance of approximately 500Kms of travel. We will provide to fill the  viability gap analysis by Viability Gap Funding (VGF)  adding 50 airports of this kind in remote areas every year. There are at present only 75 airports connected by scheduled airlines. In India there is a 350 Million middle class which has the purchasing power at par with European families but only 75 million are flying. There are 31 airports with AAI where no aircraft is landing and we need to motivate regional airlines to start services in such areas.
Responding to the disappointment of the media over non-announcement of the civil aviation policy at the show, he informed, “ Air shows are not the place to announce policies. We are working on the policy. It is in an advanced stage. Suggestions have been called for 22 items. By April 2016 the policy will be out.”
The Minister stressed that the aim is to make India a MRO hub. “ Airlines registered in India are taking their aircraft abroad for Maintenance Repair and Overhaul. We plan to get the 700Million USD business back to India. Also we hope to get a couple of billion USD business from neighbouring countries. Changes in  import duty , customs duty , VAT and Service Tax will make India a great attraction for these nearby nations.  Allowing the import of spare parts in lieu of unserviceable parts to be sent out will also be a great puller,” he stated. Nagpur has the state-of-the-art MRO and it has started functioning. There is a GE engines MRO in Nagpur.  Hyderabad has a 500 engineers strong MRO in Shamsabad which was earlier located at Begumpet. Now the aim is to ensure that aircraft come to these MROs . MRO promises to fetch India a major aviation business.
Fixed Base Operations for general aviation have been a demand of the sector for very long but nothing seems to have been done. The minister denied the existence of  policy bottle necks in the setting up of FBOs and reiterated that  It was a call to be taken by the market forces. Bhiwadi has got a greenfield airport cleared and if they want general aviation can use it for FBO but it is for the industry to put the requisition, he added.
In an answer to a question on high ATF rates he said that there is good news that ATF will be looked into by the state governments. There is no VAT and no excise duty on ATF sold to foreign airlines travelling abroad, he added.

Responding to a question on partisan behaviour towards Kingfisher Airlines keeping in mind that debt levels in Air India are very high , approximately three to four times than Kingfisher, Raju said, “ Air India definitely has debt and no one is hiding it but it is not a defaulter. Air India has informed that this is the first year they will not make an operational loss. The will make operational profit and this is music to my years. It is making net losses but is making operational profits. They were expected to turn around by 2020 but with this development they will turn around a year and a half earlier. This is great news. We infuse 2500 crore on average. Passenger yield and load factor is getting better. Assumptions related to oil prices might be an impediment to this pace of profit making.”

 

The Minister concluded by saying, “ sell the entire ecosystem not just the tickets is our aim and we want airlines, MROs, leasing companies and training simulators all to be there within the ecosystem. Only then the business will flourish and the common man be benefited.”

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