Indian Aviation: How long will the boom last?

New Delhi, Apr 10: As air traffic skyrockets in the country, new airlines are emerging at an unprecedented rate and crore of rupees are being earmarked for infrastructure improvements, prompting experts to wonder how long will the boom last.

Currently, India has 200 commercial aircraft. China has 750 and the United States more than 6,000. Even if only 10 per cent of India's 1.1 billion people fly once a year, it will mean a staggering 100 million plus passengers and a requirement for at least 2,000 planes.

Even the most conservative of forecasters believe air traffic will grow more than 20 per cent annually. In January, domestic airline passenger numbers rose by 40 per cent over the same month in 2005.

The explosive nature of Indian market had sparked a revolution.

New airlines are emerging at breakneck pace. In the past 12 months Indian carriers -- including government-owned Air India and Indian -- have ordered more than 370 jets and turboprops worth more than 20 billion dollars.

Spurred into action, the government has set a busy timetable to rebuild, modernise and restructure the airports and air traffic systems, which have been trapped in a 1950s time warp with obsolete equipment and facilities.

The minimum cost is anticipated to be 10 billion dollars and the aim is to do much of this within a five to seven-year timeline.

Amid this buoyancy and unparalleled development, there is a serious industry concern that the path to recuperation will be pitted with some big potholes.

There is a universal agreement that the future hinges on infrastructure and even Civil Aviation minister Praful Patel concedes deficiencies in the system will slow things up. International Air Transport Association (IATA) director general Giovanni Bisignani believes India understands the challenges and credits Mr Patel with comprehending the need for speed. Mr Bisignani spent a week in India recently, flying around in the cockpits of commercial jets.

''India's aviation infrastructure is outdated and requires critical changes on priority basis,'' he says.

With liberalisation, Jet Airways, now the country's largest domestic carrier, arrived in 1993. The first low-cost operator Air Deccan was set up in 2003. In more recent times others have entered the fray, including SpiceJet, Kingfisher, Go Air and Paramount.

Kingfisher Airlines owner Vijay Mallya has ordered widebody jets, including the A380, but will not be able to operate internationally until 2010. Among proposed new carriers -- all with plans to fly within two years -- are Indigo, Magic Air, Yamuna Airlines, Visa, AirOne, Indus Air and Skylark.

Experts say the country will have as many as 20 airlines across all spectrums in coming years. Many of them have big ambitions and some have deep pockets. This stampede to launch new brands has sparked fear of turmoil in the industry.

But if the aviation infrastructure does not keep pace with the burgeoning increase in seat capacity, it will not be long before these airlines that show so much promise at the moment become sick.

Most of the emergent airlines are low-cost carriers (LCCs). But being an LCC in India is not easy. The cost of operations is the same for everyone.

Lease rentals and fuel costs are currently high and navigation costs are the same whether an airline is an LCC or not. Labour costs are also going up. In fact, labour costs for pilots in India rose by 40 per cent last year. This prevents LCCs from dropping fares dramatically. These rising costs put pressure on the so-called LCCs, stopping them from lowering their prices and presenting them with a dilemma.

If they cannot drop the price, they don't get passengers. If they drop the price, they do not make money and slowly head towards bankruptcy.

Meanwhile, authorities have moved in other areas. Advanced Global Positioning Satellite (GPS) air navigation systems are becoming operational this year. The Airport Authority of India (AAI) is setting up more radar stations and all air space will be covered in the not-too-distant future.

More air traffic controllers are being trained and pilot shortages are being tackled. The retirement age for pilots has been raised from 61 to 65 and foreign pilots are being hired, although regulations still require a pilot of Indian nationality to be in the cockpit at all times, meaning aircraft cannot be flown by an all-foreign flight crew.

There are ironies in India's progress towards modernisation. For example, India is regarded as a global centre of information technology (IT) and Bangalore is the Mecca of IT software houses.

Yet, electronic ticketing by airlines in the country is just over 10 per cent.

Many believe all may not be all that rosy in Indian skies for long. The airwave has still to reach its peak, beyond which one can expect consolidation to step in.

UNI