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The margins are slim in the domestic aviation market because of too much competition and therefore, airlines should focus on starting more international services wherein profits are higher, Aviation Minister Jyotiraditya Scindia said on Wednesday.
Currently, Indian carriers operate only about 40 per cent of total international flights to and from India. Go First, which went insolvent earlier this month, was operating 128 international flights a week in April, which was just 10 per cent of its total flight network during the month.
Only about 15 per cent of SpiceJet’s total flights are international, according to aviation analytics firm Cirium’s data. SpiceJet has been making losses since 2018-19.
Vistara Chairman Bhaskar Bhat told Scindia at the Confederation of Indian Industries (CII) event that the structural problems of the Indian aviation sector persist. “The annual taxes collected by the government exceeds the losses that airlines make, so we do have a structural problem,” Bhat noted.
Bhat, who is also a director at Tata Sons, said while India is likely to get about 2,200 planes in the next two decades, the country does not have enough “support services” for the airlines and this ends up “under-servicing” the marketplace.
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Citing the example of lack of pilots. “If we are going to take 2,200 aircraft, we would need 12,000-15,000 pilots. We are at half of that number right now,” he added.
Scindia responded that India is going to have 50 flying training organisations by the end of this year.
Currently, there are 35 flying training organisations in the country. “At the end of the day, we do not want our aspiring pilots to go abroad to get trained when the same capability can be established in India,” the minister noted.
The minister said it is about time that India has an international civil aviation hub. “For too long, our civil aviation hubs have been with the neighbours on our eastern border (Singapore, etc) or with the neighbours on the western border (Dubai, Doha, etc),” he said. To build hubs, India must have more wide body planes, he added.
“We must be able to fly point-to-point from India as opposed to the circuitous route that all our passengers are being made to follow,” Scindia noted.
The minister praised the Tata Group for taking a “great step forward” by ordering 470 planes, of which 50-70 are wide body aircraft. “I urge his compatriots (other Indian airlines) to do the same because there is too much competition on the domestic side, where margins and revenues are slim. Airlines are very comfortable competing on the domestic side because the volatility is low,” Scindia said.
On the international side, revenues are much higher. “Your CASK (unit cost) is limited and your RASK (unit revenue) is higher on international routes. But the volatility is much greater,” he added. “Therefore, the time has come, and I plead with Indian airlines to take risks and face volatility because India’s flag has to fly in international space,” Scindia added.
