Jet fuel for real aviation reforms

Jet fuel for real aviation reforms

Let’s have a swift resolution after due diligence.

A sector expected to grow 8.5% every year for more than a decade, and multiply users six times in the next 20-odd years is going bust. This is the paradox of India’s civil aviation. At the heart of this sorry tale of corporate mismanagement, awful policy and cronyism is Jet Airways, once undisputed leader among our airlines, now struggling to stay airborne. Led by the charismatic Naresh Goyal for a quarter century, Jet might be grounded, unless it can pay off more than ₹8,500 crore debt, curtail costs and, possibly, overhaul its management. The last is a demand from Etihad, the UAE’s cash-rich airline, willing to take over troubled Jet and its liabilities, minus Goyal. The latter has responded with a counter-offer in return for a guaranteed 25% stake in the airline. If negotiations come to nought, prolonged bickering at the company law tribunal is inevitable, possibly followed by a piecemeal fire-sale that could destroy much value.

Jet deserves to keep flying to keep competition alive. It has one existential threat in Interglobe Aviation-run IndiGo and a potential rival in Tata joint ventures AirAsia and Vistara (the latter with Singapore Airlines). Comatose Air India survives on a $330 million taxpayer infusion. Kingfisher, Sahara and Deccan are no more. Players like SpiceJet and GoAir are too small to count. IndiGo is a ferocious price-warrior, using its dominant domestic position to force rivals into irrelevance with predatory pricing.

As the Jet dispute is sorted out, GoI must clear the clutter in aviation policy. Aviation fuel, taxed heavily, is a headache for airlines and passengers. This should be legitimately classified as an input, subsumed into the GST regime and airlines allowed to claim credit on fuel tax. The government visualises at least three airports each in Mumbai, Delhi, Bangalore and Kolkata. Good idea. First scrap the usurious fees charged by private airport operators on airlines and passengers in the existing ones. The fees inflate ticket prices and deter smaller airlines from operating these routes. Without such reforms, aviation could stall in mid-flight.