Aviation sector around the world had its weakest moment during Covid, with a slump in demand for air travel. According to the statistics, globally, air passengers declined by 60 per cent in 2020 compared to 2019. Resultantly, jobs created through the air transport industry fell by 52.5 per cent during the said period. Further, airline financial losses are projected at $371 billion in 2020. Moreover, inconsistent travel restrictions imposed by the countries led to a high level of uncertainty. Air transport is expected to be restored to pre-covid levels not before 2024.
Although, covid restrictions have led to decline in domestic and international passenger traffic during FY16 to FY21. By 2024, India is still expected to overtake the UK to become the third largest air passenger (International and Domestic) market. The growing demand has led to existing airline operators expanding their capacity along with the introduction of new operators. To cater the increasing demand, India has planned to increase the number of operational airports as well as commercial airplanes in the coming years.
In order to reach the above goal, the Government has taken several efforts on the policy front. In 2016, the National Civil Aviation Policy (NCAP) was introduced to enhance affordability and connectivity of air transport. Further, “to promote tourism, employment and balanced regional growth, enhance regional connectivity through fiscal support and infrastructure development and enhance ease of doing business through deregulation, simplified procedures and e-governance”
Further, The Regional Connectivity Scheme – UDAN has been launched by the Government, which plans to spread connectivity to unserved and underserved regions of the country. Its purpose is to make air travel affordable and widespread.
The Public-Private Partnership Model (PPP) is being used as a tool by the Airport Authority of India (AAI) to increase the investment in airport infrastructure. So far, twelve airports are already being developed/run under the PPP model. Apart from this, AAI has recently approved the privatisation of 13 more airports by next year, which will include six major ones and seven smaller ones that will be clubbed with the bigger ones. It is pertinent to note that the AAI has earned approximately ₹ 30,069 crore till 2020-21 from its airports that are being run by private entities. However, the cause of worry is that no comparative study was carried out by AAI showing that the PPP model would be more beneficial for the growth of the aviation industry before implementing the PPP model.
Implementation of above policies and schemes will create an impact on mainly two Sustainable Development Goals (SDGs).
This goal essentially focuses on promoting reliable and resilient infrastructure which has a direct impact on economic growth and development of the country. India, by building new airports and expanding and augmenting facilities at existing airports, is putting a foot forward in achieving the SDG 9.
This goal recognizes the importance of multi-stakeholder partnerships in achieving all the SDGs. In this context, multi-stakeholder partnerships include public, public-private and civil society partnerships. India, by using a PPP model to increase investment in the aviation sector is indirectly contributing towards achieving the SDG 17.
In the post-covid world, the infrastructure development in the Aviation sector by the AAI is going to play twin roles, firstly, it will develop the economy and make air travel affordable for the majority of the population. Secondly, it will also help in achieving the said SDGs.
Despite several government measures in the aviation sector, the airlines in India are still trying to cope up with the losses. The condition of the aviation sector can be estimated by the fact that two major airlines, Kingfisher and Jet Airways have failed in the last 10 years. Further, regular lockdowns during Covid-19 have only added to the miseries of airline operators, resulting in a high level of insolvency risk, which has a potential to impact the entire industry, including airports.
In a recent development, after a long wait the government has permitted airlines to operate a maximum of 85 percent of their pre-Covid domestic flights. It can only be hoped that this will bring a sigh of relief for airline operators.
Going forward, it can be expected that competition is going to increase in this space. To begin with, Air India will have a new owner among SpiceJet or the Tata Group, who have placed their bids. With a new owner, aggressive transformation of the airline can be expected. Further, Jet Airways aims at restarting its domestic operations by first quarter of 2022, and international operations by third or fourth quarter of 2022. Apart from this, Akasa Airlines, led by Rakesh Jhunjhunwala, also plans to make an entry next year as an ultra-low-cost carrier.
These developments signal that the recovery of airlines will only be gradual and passenger traffic cannot be expected to reach pre-Covid levels in near future.