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How long can I deny connectivity to citizens directly from their towns, asks Ajit Singh

In an exclusive interview with Business Today's K.R. Balasubramanyam, Civil Aviation Minister Ajit Singh says as metros are well connected, the focus is now on Tier III, Tier IV cities to revive regional connectivity.

K.R. Balasubramanyam        Last Updated: June 18, 2013  | 10:48 IST

On June 9, Civil Aviation Minister Ajit Singh, flew to London aboard a Boeing 787 Dreamliner flight to participate in an event celebrating the 65th anniversary of Air India's first flight to London. K.R. Balasubramanyam, who accompanied him, spoke to him at length during the flight:

Q. How do you see the airline sector performing during the current fiscal year?
A. The world economy should do better. The Indian economy, too, should do better. The sector as a whole, I think, will grow this year.

Q. Domestic airlines are still struggling with high costs.
A. Part of the reason was the economy, part was oil prices. Air turbine fuel (ATF) accounts for half of an airline's operating costs. We have allowed airlines to import ATF directly. There are, of course, infrastructure issues. This year they should begin to import. SpiceJet has done a lot of work on that.

Q. There are concerns that our bilateral treaties come at a cost...
A. Lots of people say foreign airlines are flying more Indian passengers than Indian carriers. But our first priority is passengers. We have to sign more bilaterals.

Levying
airport development fee to meet capex needs is not fair

International traffic is growing. So what do we do with passengers? Air India does not have the capacity, yet (to carry them all). Kingfisher is not flying any more. Jet's deal with Etihad should help it a lot. It is not just that they (Jet) are flying to Abu Dhabi. They will be flying from 23 Indian cities through Abu Dhabi to many cities in the world. It will take an Indian carrier's footprint to many cities in the world.

Recently, we have increased the bilateral with Oman and Singapore also. But they are using much more of their rights than we are.

In the last year and a half, I have allotted 81,000 seats to Indian carriers to the Gulf and the neighbouring countries. Earlier, only Air India was mostly using that. Now, Indian carriers together are using about 51,000.

Q. Singapore Airlines wanted to start services to Madurai and Pune, but it was denied. Why?
A. I am giving Indian carriers the chance to fly from there. I have denied rights (to foreign carriers) for one and a half years. I have not added a single Indian city to Etihad Airways, Singapore Airlines or Oman Air.

The view is, 'What will happen to Delhi and Mumbai airports (if access to more Indian cities is granted)?' But if Indian carriers don't fly (to these smaller cities), how long can I deny? I cannot hold out any longer.

Why have we been developing these international airports in India if we are not going to allow airlines to fly from them? Point to point flights are cheaper and take less time. You mentioned Pune. How long can I deny citizens of Pune their right to fly abroad directly from their town, when no other carrier is ready to fly? What do I do? I have to give the rights to somebody. We will have to give bilateral rights to other countries too.

Q. What are you doing to revive regional connectivity?
A. Metros are well connected, we must focus on Tier III, Tier IV cities. Civil aviation is not just for rich people. Even a businessman in a small town needs it. We are now working on a scheme to cut down costs at small airports: No landing charges, no navigation charges, no security charges. We are requesting the states to waive property taxes. All this should make things commercially viable for airlines to operate to these towns.

Q. Are airlines buying smaller planes?   

We will
be turning Air India into a hybrid service

A. Air India has plans to buy smaller aircraft, SpiceJet has, I understand IndiGo is forming a subsidiary to buy smaller planes, Jet has big plans to get smaller planes. They have to get passengers from smaller cities for growth.

Q. Is there any new airline proposal before you?
A. Air Asia is the only new airline expected. They have a good reputation.

Q. Would Air Asia's arrival lead to a fare war?
A. Competition in airfares is good to some extent, but lowering airfares suddenly by one airline is considered unfair competition. But that is for the Competition Commission of India to look at.

Q. There was a proposal from the Kerala Government to start its own airline called Air Kerala…
A. I have been reading about it in newspapers. They have not applied for one.

Q. Is Kingfisher Airlines a closed chapter now?
A. As far as the government is concerned, they have not given a viable plan. Safety, of course, is the paramount thing. This is a very capital intensive industry. A few hundred crores won't take you anywhere. You need deep pockets to run this business. Just 'Hurricane Sandy' in New York pushed many airlines from black to red.

Q. In India, we have large numbers of unemployed pilots on the one hand, and several expat pilots employed by airlines on the other. Where do we stand now?
A. I am aware of the situation. Five years ago, many youngsters aspired to be pilots. Many people I know sold their ancestral land, spent up to Rs 50 lakh to undergo pilot training. In this industry, a certificate is just the first step. The phasing out of expat pilots takes its own time.    

Q. You have taken a tough stand about levying Airport Development Fee (ADF) by airport operators…

Air India
flights will operate on time. They will not wait for anyone

A. The airport development fee (ADF) was imposed because their (airport operator) earlier estimates of costs went haywire, and they needed money to complete the project. There was a lot of controversy. They were very high charges. Levying ADF to meet Capex is not fair. We have tried to cut it down as much as we can. But given the situation, we could not totally abolish it. However, I have not allowed Chennai and other airports to have ADF.

Q. How is Air India performing now after the turnaround plan?
A. In the turnaround plan, which was sanctioned after I became minister, Air India so far has been meeting the milestones. Its domestic market share has increased from 16 per cent to more than 20 per cent, load factor has improved a lot, on-time performance has improved.

In the airline business, it is the morale of the employee that matters most. And employee morale is getting better. Employees have a sense of belonging now. We have made it clear that the government of India will no longer give away money. They must compete with private airlines.

Q. How frequently do you look into Air India's performance?
A. Almost every week I review Air India. There are many routes not viable. We had a committee under Prof Dholakia (former director IIM-Ahmedabad), which made certain cost cutting recommendations. That should, after implementation, cut costs by Rs 1000 crore.

Q. But there seems to be no future for full service carriers in the domestic sector. How will you deal with this?                                                                                                                                                                                   
A. We will be turning Air India into a hybrid service. While some domestic flights will have both full-service and low-cost seats, some flights will be fully low-cost.

In economy class, for instance, we will charge for preferred seats, for meals, etc. Now everyone is paying for breakfast whether he eats it or not. Even in the low cost seat, you will have a choice. If you ask for a particular seat, then there is the extra cost.

Q. What guided the choice of new Independent Directors on the Air India Board?
A. We wanted to bring in people with expertise. Gurcharan Das has a very illustrious background. We have Air Marshall (K K Nohwar) whose main expertise is in operations; then we have Renuka Ramnath, whose expertise in finance will help Air India bring down costs of borrowing; Founder-Director of IIT, Roorkee (Prem Vrat) will help in the MRO (maintenance, repair and operations); Prof. Dholakia, of course, has been working with Air India for some time. I hope to use them not just as part time directors but some of them like Prem Vrat more intensely in the MRO business. Each one will be a big asset.

Q. When do you think Air India will finally turn profitable?
A. According to the turnaround plan, Air India should be profitable by 2018 or 2019, but I hope it will turn profitable much earlier. Last year, it has reported an EBITDAR of Rs 18 crore plus. Next year, it is expected to report about Rs 1,000 crore. I am not saying it is out of the losses phase, but this is a step forward.  

Q. What are the problems you identified with Air India, and what are you doing about them?
A. To cite a few, Air India has offices in many parts of the world where they don't fly and have no plans to fly in the near future. We are now closing them down. There are lots of assets estimated worth Rs 10,000 crore, which we are now trying to monetise. We have hived off the engineering and ground handling, and are developing MRO as an independent business. We are trying to hire a CEO from outside because it is not enough if we focus on business just from Air India, but should get business from other airlines.

We are now moving a lot of staff to Kochi. A lot of pilots are currently living in Mumbai and flying to Kochi and that flying time is counted as working hours. That is a huge extra cost.

In the past, every year there were at least two strikes. Today, Air India employee morale is high. When I became minister, the employees were not sure whether they would get their next month's salary. No such concerns now.

We are also removing scope for favouritism. Earlier, some trainees would get 1,000 hours of training , while some would not get even 200 hours. It affects their promotions. Anything I see in the newspaper, or in e-mails, I inquire about. I use my plain commonsense to set things right.

Q. What have you done about freebies to Air India employees?
A. We have restricted upgrades and, are not allowing extra free baggage. We are also ending this practice of pilots living in one city and working in other. (At the business level) we have ended the companion scheme in the domestic sector after we found cases of original ticket holder cancelling his ticket while the free companion ticket holder travelling.   

Q. Air India on time performance seems to have improved…
A. Air India flights will operate on time. They will not wait for anyone because it affects so many passengers. They have their schedules to meet.  

Q. And, new routes?
A. Air India will start flying to Australia in the next 2-3 months, to Rome, Milan, Indonesia, Hong Kong, China etc.

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