Election magic! The government told us about all the mega aviation projects it wants to finish in a canter (and the ones it won’t touch with a bargepole).
The short window left for the government before next year’s election could be a banana peel, with competing priorities, a huge slate of unfinished projects, and mounting stress in the sector.
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Tarun Shukla
Nearly a decade ago, when the Congress-led United Progressive Alliance’s (UPA) first term was about to end, the then civil aviation minister Praful Patel went airport hopping every two hours. He would be seen either laying foundation stones or inaugurating new terminal buildings.
The cast of characters has changed — but little else. With general elections due next year, ribbon cutting is back in vogue in the aviation circuit.
Prime Minister Narendra Modi's government will lay foundation stones at over half a dozen airports across the country over the next six months, formally kicking off works worth INR18,000 crore.
According to two government officials, in the short window between now and the elections, modernising airports, ensuring no airline shuts down, and sidestepping controversial clearances will be high on the agenda.
"One of our huge priorities is to ensure as many of our airport projects as possible should take off," aviation secretary Rajiv Nayan Choubey tells ET Prime.
Among the high-profile projects are the second airport meant to service Delhi, in Uttar Pradesh's Jewar, and airport expansion at Lucknow, Agra, Dehradun, Patna, Leh, Trichy, Pune, and Chennai.
"Some of the major ones like Jewar, Patna, and Chennai may be inaugurated by the prime minister himself," Choubey says.
Most of these projects will take months, at least, to complete. The good thing is, many of them are run by state-owned Airports Authority of India, and therefore, won’t get tangled in the long processes involved in privatisation tenders.
Airport modernisation is critical for the Indian aviation sector, which is growing in double digits and will be absorbing 136 planes this fiscal alone, with another 1,055 ordered.
The growth is so strong that India’s largest airport, Delhi, which handled 65.7 million passengers in FY18, is likely to cross 80 million passengers in FY20, potentially overtaking London’s Heathrow airport.
Airlines are already fighting to get slots and parking bays at key airports, pushing them to add flights to cities which are not as profitable and burning fuel hovering over congested airports like Delhi and Mumbai.
Of course, helping the cash-guzzling sector — still perceived to be somewhat elite — will stretch the government, and not just for time.
"It just so happens that both our airline sector and the Government of India’s financials are under stress at the same time," Choubey says. “It’s indeed proving to be a difficult task for us."
Air India bailout to be reworked
It won’t only be excitement around new projects. The government has to get around to the Maharaja-shaped elephant in the room as well. The national airline, under stress after a botched-up merger and a controversial aircraft deal in the UPA regime, has been left directionless by a failed privatisation attempt that ran for over a year till this summer.
"Air India must become a more streamlined company," Choubey says, adding that "the intention is that since the disinvestment process is on — it’s just that I cannot sell my shares when market conditions are adverse, therefore I will wait when I will get good value for my shares — till then I will keep Air India healthy and competitive.”
The earlier bailout package, cleared by the UPA government, envisaged an INR30,000 crore equity infusion in the airline till 2021. Nearly INR27,000 crore of equity has already been infused in the flag carrier.
But it’s unlikely that the remaining INR3,000 crore equity support spread over the next three fiscals will keep the airline afloat. Air India is expected to incur heavy loss this fiscal.
The 2012 bailout package and the airline’s expansion were based on what a former Air India chairman, who did not wish to be named, called “unrealistic” projections of the rupee at 45 to a dollar, and crude oil at USD35 a barrel. Both have shot up drastically, making the airline’s operations unsustainable.
"So, the quantum of support goes up” in the new plan being considered, Choubey says, acknowledging the worsened market dynamics. “The finance ministry is looking into those numbers. We will have something by the end of this month. That is our attempt."
Air India was to get this money in return for cost-cutting and improvement in performance. While it has improved its on-time performance, occupancy, and revenue, it has been unable to cut legacy costs.
The bailout package will potentially clear Air India’s legacy debt, equity, and government guarantees for fresh borrowing. “It will not be a long-term package," Choubey says.
The short window left for the government before next year’s election could be a banana peel, with competing priorities, a huge slate of unfinished projects, and mounting stress in the sector.
ShareGift this article
Tarun Shukla
Nearly a decade ago, when the Congress-led United Progressive Alliance’s (UPA) first term was about to end, the then civil aviation minister Praful Patel went airport hopping every two hours. He would be seen either laying foundation stones or inaugurating new terminal buildings.
The cast of characters has changed — but little else. With general elections due next year, ribbon cutting is back in vogue in the aviation circuit.
Prime Minister Narendra Modi's government will lay foundation stones at over half a dozen airports across the country over the next six months, formally kicking off works worth INR18,000 crore.
According to two government officials, in the short window between now and the elections, modernising airports, ensuring no airline shuts down, and sidestepping controversial clearances will be high on the agenda.
"One of our huge priorities is to ensure as many of our airport projects as possible should take off," aviation secretary Rajiv Nayan Choubey tells ET Prime.
Among the high-profile projects are the second airport meant to service Delhi, in Uttar Pradesh's Jewar, and airport expansion at Lucknow, Agra, Dehradun, Patna, Leh, Trichy, Pune, and Chennai.
"Some of the major ones like Jewar, Patna, and Chennai may be inaugurated by the prime minister himself," Choubey says.
Most of these projects will take months, at least, to complete. The good thing is, many of them are run by state-owned Airports Authority of India, and therefore, won’t get tangled in the long processes involved in privatisation tenders.
Airport modernisation is critical for the Indian aviation sector, which is growing in double digits and will be absorbing 136 planes this fiscal alone, with another 1,055 ordered.
The growth is so strong that India’s largest airport, Delhi, which handled 65.7 million passengers in FY18, is likely to cross 80 million passengers in FY20, potentially overtaking London’s Heathrow airport.
Airlines are already fighting to get slots and parking bays at key airports, pushing them to add flights to cities which are not as profitable and burning fuel hovering over congested airports like Delhi and Mumbai.
Of course, helping the cash-guzzling sector — still perceived to be somewhat elite — will stretch the government, and not just for time.
"It just so happens that both our airline sector and the Government of India’s financials are under stress at the same time," Choubey says. “It’s indeed proving to be a difficult task for us."
Air India bailout to be reworked
It won’t only be excitement around new projects. The government has to get around to the Maharaja-shaped elephant in the room as well. The national airline, under stress after a botched-up merger and a controversial aircraft deal in the UPA regime, has been left directionless by a failed privatisation attempt that ran for over a year till this summer.
"Air India must become a more streamlined company," Choubey says, adding that "the intention is that since the disinvestment process is on — it’s just that I cannot sell my shares when market conditions are adverse, therefore I will wait when I will get good value for my shares — till then I will keep Air India healthy and competitive.”
The earlier bailout package, cleared by the UPA government, envisaged an INR30,000 crore equity infusion in the airline till 2021. Nearly INR27,000 crore of equity has already been infused in the flag carrier.
But it’s unlikely that the remaining INR3,000 crore equity support spread over the next three fiscals will keep the airline afloat. Air India is expected to incur heavy loss this fiscal.
The 2012 bailout package and the airline’s expansion were based on what a former Air India chairman, who did not wish to be named, called “unrealistic” projections of the rupee at 45 to a dollar, and crude oil at USD35 a barrel. Both have shot up drastically, making the airline’s operations unsustainable.
"So, the quantum of support goes up” in the new plan being considered, Choubey says, acknowledging the worsened market dynamics. “The finance ministry is looking into those numbers. We will have something by the end of this month. That is our attempt."
Air India was to get this money in return for cost-cutting and improvement in performance. While it has improved its on-time performance, occupancy, and revenue, it has been unable to cut legacy costs.
The bailout package will potentially clear Air India’s legacy debt, equity, and government guarantees for fresh borrowing. “It will not be a long-term package," Choubey says.
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