Direct air routes to be opened, more airports to run PPP way: FM Nirmala Sitharaman

NEW DELHI: Direct flight routes by making hitherto restricted airspace available to commercial airlines and leading to savings of about Rs 1,000 crore annually in operating cost for airlines was among the three things announced for India’s critically ill aviation sector on Saturday. Finance minister Nirmala Sitharaman said six more Airports Authority of India (AAI) airports will be handed over for being run public-private partnership (PPP) way and aircraft maintenance centres will be facilitated in India.While all the three have been work in progress for months, their announcement as corona relief package for aviation means their implementation now may be sped up.
The deeply distressed aviation sector — with the majority of Indian airlines nearly bankrupt — is, however, hoping to get some substantive and immediate relief to survive the pandemic-induced unprecedented downturn in travel. Kuljit Singh, transactions partner of Ernst & Young India, said: “These are good initial first steps and this may be followed by a phase 2 reforms package. Private airlines in India have nearly all borrowings in forex (by way of foreign aircraft leases or foreign EXIM backed loans) and have little collateral to offer for new loans (as they own a low percentage of aircraft, which are anyway mortgaged, and typically have negative working capital). They may have difficulty in raising unsecured debt from the Indian banking system to tide over these Covid problems.”
“Therefore, the second phase may need to have more reforms in taxes on fuel, subvention for airport charges, government guarantees for additional unsecured borrowings of private airlines… some private airlines may need to arrange for external equity capital, even at current depressed valuations, to tide over these unusual circumstances,” Kuljit Singh said.
Airlines say this is the real relief they seek to survive, with time fast running out for many of them.
The FM said: “Only 60% of the Indian airspace is freely available. Restrictions on (its) utilisation will be eased so that civilian flying becomes more efficient. This will bring a benefit of about Rs 1,000 crores per year for the aviation sector through lower fuel burn, crew cost through reduction in flying time. This will also have a positive environmental impact,” the FM said.
AAI had last year decided to hand over six more airports to PPP players. Senior AAI officials say these include Bhubaneswar, Varanasi, Raipur, Indore, Amritsar and Trichy airports. Bidding was held in 2018 for six airports and Adani Group had emerged the highest bidder for all of them. So far it has signed agreements to operate Ahmedabad, Lucknow and Mangaluru airports for 50 years and is yet to get Jaipur, Trivandrum, and Guwahati airports due to some procedural issues.
“AAI will also get a down payment of Rs 2300 crores. Six more airports have been identified for the second round and bid process will commence immediately. Additional Investment by private players in 12 airports in the first and second rounds is expected to be around Rs 13,000 crore. Another 6 airports will be put out for the third round of bidding,” the FM said.
All these announcements were made when PM Modi had reviewed the aviation sector on May 1 also.
“India will become a global hub for aircraft maintenance, repair and overhaul (MRO). The tax regime for MRO ecosystem has been rationalised. Aircraft component repairs and airframe maintenance will increase from Rs 800 crores to Rs 2,000 crore in three years,” the FM said.
“Major engine manufacturers in the world would set up engine repair facilities in India in the coming year. Maintenance cost for airlines will come down,” she said.