Flight mode: India can be number 3 globally, says MoS Aviation

Explaining the reason why the 20-aircraft norm was retained in the new Civil Aviation Policy, Minister of State for Aviation Mahesh Sharma and Aviation Secretary RN Choubey tell CNBC-TV18 that this will ensure airlines have operational capabilities to fly domestically as well once they take off on international routes.

Indian aviation sector currently ranks eighth on the global scale and the new policy aims to take it to the third spot, Sharma says.

The duo say the policy targets revival and addition of 50-80 new airports over the next 3 years and has a vision to connect smaller towns and cities.

On foreign direct investment being opened up in the aviation sector beyond the current 49-percent limit, Choubey says it is an aspiration but has not yet been considered.Below is the transcript of Mahesh Sharma and RN Choubey's interview with CNBC-TV18's Ronojoy Banerjee and Sindhu Battacharya.A: The vision is exactly clear that let us do a transparent and honest and clean government system. With this transparency we have taken out the five year rule and 20 aircrafts is required otherwise how will you serve our domestic needs. It is our moral duty, it is our commitment to the people of this country also that we will be providing you domestic connectivity also. So, we have to watch the interest of that common man and domestic passenger of this country also.Q: There is also a concern that the government is increasingly intervening in matters that should be left to business. You mentioned of possible regulation of fares in cases of natural calamities. Can you elaborate a bit on that, the thinking behind this?Sharma: This is a market driven industry. Worldwide there is no capping in the field. I have given this data to the people also that only 1.7 percent of the total tickets are being given in higher bracket. We have no intention at present to control that market. However at the time of needs and natural calamities, government also has a moral commitment to the people of this country and worldwide people also that they will stand with the people of this country also.Suppose there is flood like what happened in Chennai, Nepal, we regulated the price, that nobody will charge more than Rs 4500. So, it is called for, it is demand of the time, it is a requirement from the government system.Q: You have said that the industry has grown by 22 percent in India in this year alone, with this policy the headroom for growth?Sharma: 22 percent growth is tremendous compared to 12 percent of China, 5-6 percent of USA. Right now we are at rank 9 in the scale, we want to take our civil aviation to number 3. I am sure we will be able to touch it. India has got a strong power of 125 crore people. We want to use that power of this 125 crore people of this country.Q: In terms of the un-served airports there are 75 overall airports that we have which have scheduled airlines operating out of it. Can you give us a number, a target that you see in the coming 4-5 years?Sharma: Minister has declared about 50 airports to be taken in next financial year and we propose to add another 50 percent to that. So, from 50-100. At present we are say around 80, so we will be adding around 80 more airports via this scheme by the next three years. The process will start immediately. Initially we have around 20 airports which are ready to be usedIn first phase we will implement this scheme to the closest airports. We have given a funding of about Rs 50-100 crore. We will be giving haircuts to the state government also, haircuts to the airport authority also and I think with that vision we will be able to develop somewhere between 50 and 100 airports in the next coming three years.Q: What is the most significant part of the policy? What is it that is going to drive aviation from here on as far India is concerned, which is the fastest growing aviation market in the world or one of the fastest right now?Choubey: In fact, I am excited by the fact that we had just about 80 million passengers flying in our country every year domestically, just 80 million. When the middle class population alone is 350 million, so it showed that we were not providing enough opportunities for people to fly. When we did that analysis what we found was, that firstly the airports were not close to the place of work or place of stay and secondly when people have to fly from smaller places obviously the aircraft is going to be a smaller aircraft and therefore it is going to be costlier operation to fly there and people will not fly from a smaller town if the tickets are expensive. We tackled both these issues and we decided that we will revive 50 more airports in the next three years and we will make tickets available for the regional connectivity at an absolutely affordable price of Rs 2,500 for one hour of flight. A combination of these two things will lead to a stupendous growth in the domestic flying from 80 million today to about 300 million in five years. It is a huge growth rate. Today we are happy with and rightly so we are happy with 22 percent growth rate. I am looking at something like 50-60 percent growth rate in the next five years.Q: Will it be correct to say that passengers who are travelling let say Delhi-Bombay or Delhi-Bangalore or any of the trunk routes will actually be subsidising passengers who are as yet unconnected or unserved and would like to get on the India’s aviation map?Choubey: Not really, please remember when we are going to revive these 50 airports. We are not going to ask for money from those who are flying today. We will be doing it from our own resources of the government and resources available with the Airports Authority of India. It is just that for the limited and small purpose of viability gap funding, so that the ticket prices brought within Rs 2,500 for that we will create additional connectivity fund, which will be a very, very small amount and with that because the flights which happened from the smaller cities those flights by necessity will been small aircrafts and therefore the requirement of subsidy for the small aircraft per passenger is not going to be huge and that is that can be easily met with a very, very small levy. The airlines may even decide not to pass it on.Q: Moving on to next question which is 5:20. We have heard CEOs of at least two airlines who should have completely welcome the dilution of the rule sounded little disappointed in the fact that the rule has been removed not in entirety, but has only been diluted. Why keep the 20 airport norm when it probably doesn’t exist anywhere in the world?Choubey: The reason why we have kept the requirement of 20 aircraft is because we would like the airlines to have adequate operational capability both to fly within the country and outside and we fell that an airline which has got 20 aircraft would have developed that capability. If an airline decides to start flying let us say as an example just after 3 aircraft obviously he will not have the capability either to serve the domestic or the international clientele. That’s the reason why this 20 aircraft has been kept. Any airline today if it wishes to fly let them quickly ordered that much aircraft either take it on lease or buy it out and start flying abroad immediately. There is no time requirement. All that we need is set up and operational capability.Q: On open skies the policy suggests that there will be open skies the country beyond 5,000 kilometres, but not within 5,000 kilometres why is that restriction still continuing and also your comments on what really happen to the proposal to auction bilateral rights?Choubey: On the first question you will whenever we open the market, we do so in a calibrated manner, so the whole idea of first opening up countries which is beyond 5,000 kilometres and then in the next phase consider the same for countries within 5,000 kilometres. The whole idea is a calibrated approach to give sufficient time to the domestic airlines to become capable of facing the competition and nothing else that’s the whole idea, to do it in a phased manner.Q: What are the other specifics of the policy that you would like to talk about for example there was a proposal earlier in the draft policy that the FDI limit could be enhanced beyond 49 percent. Right now foreign carriers can only pick up 49 percent why was that not taken forward?Choubey: You would have noticed in the draft policy there was no clear cut statement that it will be increased to 49 percent. It only made a kind of an aspirational statement saying that it will be considered whether it can be increased beyond 49 percent. Now it was felt that a loosely hanging statement like that did not need to remain in the policy because if something has to be merely examined then it can be done even without policy saying so. So, we did not wish to have that kind of a statement in the policy and we have removed it.Q: First reading of the policy or from your presentation it appears that the cost of operations for airlines has not really been brought down because excise on ATF was just increased in the budget. The airlines are now required to follow amended route dispersal guidelines, which means they have to mount more flights on unviable routes like the North East or other places, so what really is the endeavour to bring down the cost of operations for airlines since India is a very high cost operation thanks to the taxation on ETF?Choubey: Thank you for this easy question. You will see the cost of operations depend on the passenger load factor. Now if I have created successfully an ecosystem which will make the domestic flying numbers go up from 80 million to 300 million.