Union Finance Minister Nirmala Sitharaman on Saturday announced several measures to help the aviation sector tide over the coronavirus crisis. This included opening up more air space for civilians flying. The finance minister claimed that the move to open more air space for civilian flights will bring Rs 1,000 crore per year benefits for the aviation sector, facing unprecedented crisis amid lockdown to contain coronavirus pandemic.
As of today, only 50 percent of air space in India is free to use. The government argued that airline operators will save a significant amount of fuel on shorter routing options on Conditional Direct Routes (CDR) passing through military air space. However, experts contend that there is hardly any room left for further significant shortening of routes, but even if it's done by opening up more air space, there will be marginal effect in terms of savings for the airlines.
Claims are inflated
A similar measure was taken by the government in 2017 when 13 Conditional Direct Routes (CDR) were opened for airlines. But these routes were available for airlines depending on the timing and only when not used by the military - mostly one weekend and when the weather was not fit to fly for the military. Moreover, experts claimed that the additional fuel burn takes place due to traffic congestion and not primarily because of the longer routes.
"Maximum additional fuel burn takes place while holding over high-density air traffic destinations like Mumbai, Delhi & Hyderabad. Flights immediately North of Delhi are prohibited due to Rashtrapati Bhawan. Therefore all departures/arrivals have to take a longer route around Delhi when flying to/from airports in the North," Captain Amit Singh, Fellow, Royal Aeronautical Society, UK & Former Head Airline Operations, Safety, told International Business Times, India in a statement.
Actual saving come from lesser congestion
The Rs 1,000 crore benefit that the Narendra Modi government is claiming also looks infeasible. According to a paper presented by India on Civil-Military Cooperation and Flexible use of airspace in the country at the 54th Conference of Directors General of Civil Aviation Asia and Pacific Regions, airlines saved approximately 115 tonnes of aviation fuel from 13 conditional direct routes. At today's fuel price of Rs 26,000/KL, the cost of 115 Tonnes will be approx INR 10 crore, which is nowhere near the claimed benefits.
Another airline pilot with an experience of thousands of flying hours and an aviation specialist who chose not to be identified told IBTimes India that the airlines are already using most direct routes and there isn't much room for any more improvements. He also said that the savings projected by the government is false and the government didn't explain how they calculated Rs 1,000 crore benefits.
"We already fly optimised (most direct routes). In technical terms, they are called Q-Routes and started a few years ago. So there isn't much to improve... The savings projected are false and notional. They haven't explained the calculation and the cost of ATF they have factored," he said.
The Delhi-Bombay route is the busiest but it can't be shortened anymore. And the delays and additional fuel burn happens at the airports due to traffic congestion. The maximum additional fuel burns happen while holding over high-density air traffic destinations like Mumbai, Delhi and Hyderabad. On February 23, 2020, a notice was sent to Hyderabad pilots asking them to carry additional fuel due to congestion to avoid diversion.
IBTimes texted Union Minister of State for Finance & Corporate Affairs Anurag Thakur, who was part of the press conference when the package was announced for the aviation sector, and the ruling party's national spokesperson Sudhanshu Trivedi but they both didn't respond to our queries. The story will be updated if they respond.
When we asked Economic Advisor to the Ministry of Civil Aviation Vandana Aggarwal for her response, she referred the query Joint Secretary Usha Padhee, who too didn't respond.
As far as the government's plan to make India a Maintenance, Repairs and Overhaul (MRO) hub is concerned, Singh said that the measures announced on Saturday by Sitharaman seem nothing but the repackaging of old announcements.
"The industry surely needs better MRO facilities but the standards need to be improved as well. Air India and GMR MRO's facilities are functional. Nagpur is already being developed as an MRO hub. Only a significant cost saving through rationalization may attract present airlines and others from neighboring countries who are currently preferring Sri Lanka for major checks," he said.
Experts feel India needs to improve its aviation training infrastructure. Currently, almost 60 percent of training takes place outside the country and that too with foreign companies. The DGCA had asked airlines with over 20 aircraft to have training facilities in India by December 2018. However, this deadline had to be extended by one more year but most airlines still don't have an active training facility in the country. The airlines are still not able to comply and its highly likely the deadline shall be extended further given the current circumstances.
With the forecasted growth rate, which has now come down even further, Captain Singh said that India would be spending $1.5 billion on training and 60 percent would be outsourced to foreign companies, therefore, losing forex.
How long can airlines survive this crisis?
A report from the Aviation consultancy Centre for Asia Pacific Aviation (CAPA) in March had warned that most airlines may go bankrupt if the governments didn't intervene. And this has already started. Thai Airlines have decided to go to the bankruptcy court.
Given the prevailing situation, most of the Indian airlines are also staring at bankruptcy in the absence of liquidity. Due to its large cash reserves, Indigo is likely to tide over the crisis but smaller airlines like GoAir and Spice are likely to go bankrupt.
"Ideally only IndiGo should survive since they have maximum cash reserves. Spice and Go (Air) should have gone bankrupt by now. Source of funds is unknown. Vistara might get some funding via the joint venture," Caption Singh added.
