Indigo and Spicejet get shorter routes, cheaper fuel bills while Adani, GMR, and GVK get more airport projects to bid for
- Finance Minister
Nirmala Sitharamanannounced measures that will benefit both airline operators like IndiGo and SpiceJet, as well as developers like GMR, GVK, and Adani Group.
- India opened up more of its airspace for airlines to ply, decided to put up more airport development projects for bidding.
- Another major investment was Sitharaman’s bid to make India an MRO hub – Maintenance, Repair and Overhaul.
AdvertisementIndia opened up more of its airspace for airlines to ply, decided to put up more airport development projects for bidding, and ease taxation as well as restrictions on maintenance and repair to bring down costs for aviation firms.
These reforms announced by Finance Minister Nirmala Sitharaman will benefit both airline operators like IndiGo and SpiceJet, as well as developers like GMR, GVK, and Adani Group.
The government estimates airlines will save about ₹1,000 crore a year by flying shorter routes.
“60% of the Indian airspace is freely available, because it is fairly restricted for civil and defence purposes, so we have been taking longer routes. This has to be rationalised for optimum utilization of time and fuel. Customers can get to their destinations quicker and cheaper,” Sitharaman said.
More airport projects up for grabs
The second step taken was that six more airports will be put up for auction by the Airports Authority of India and will be built on public private spaces. “Additional investments will be made by private players in 12 airports where investments are already present. The financial implications will be on the AAI. The first and second round of investments to get ₹13,000 crore,” said Sitharaman.
India currently has several airport projects under construction – the Jewar international airport in Greater Noida, the Mopa Airport in Goa, Navi Mumbai international airport in Maharashtra, Sabarimala airport in Kerala among others. In April 2020, GMR got the go-ahead for the Bhogapuram airport in Andhra Pradesh.
In February 2019, the Adani Group won a tender to operate all six government-owned Indian airports located in Ahmedabad, Jaipur, Mangaluru, Trivandrum (Thiruvananthapuram), Lucknow, and Guwahati.
Making India an airline maintenance hub
Another major investment was Sitharaman’s bid to make India an MRO hub – Maintenance, Repair and Overhaul. “Most Indian aircrafts go abroad for their repair works and spend there. But India has all the capacity – manpower and soft skills to set up an MRO hub here. India can be the centre for many of the flights for South East Asia as well as westwards,” she said.
This will be a major step that we want to make sure India benefits from, she added. Not just the civil sector but defence aircrafts will also benefit from it.
Through this, maintenance will also be cheaper for the aviation sector.
The issue the MRO industry used to face because of the aircraft used to fly to other countries for repair. "In India we have a promising civil aviation sector, so we want the MRO sector to be located in India and much of the repair work should be done here. The problem they used to face was competitiveness was in GST. GST rate used to be 18%, so the meeting held in March the rate has been brought down to 5% with full input tax credit and that is something that will make the MRO industry very competitive," said the government.
The coronavirus pandemic has left the Indian airlines sector stranded on the runway. All domestic and international flights have been suspended ever since the lockdown. “It will take 2-3 years for air travel to return to 2019 levels and a few more years to return to long-term growth trends according to Boeing,” said a Centrum Broking report last week.
“These are preliminary estimates, and aggregate losses could increase if the lockdown is extended beyond the first quarter. As and when operations resume, overall operational capacity will hover at 50-60% for the rest of the fiscal. Consequently, mergers and acquisitions of airlines, and relook at expansion plans of private and upcoming greenfield airports would be possibilities," said Jagannarayan Padmanabhan, director and practice leader, transport & logistics, Crisil Infrastructure Advisory.
Globally, the industry’s revenues could be cut by $252 billion in 2020.
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