They need to shell out at least Rs. 150 for a cup of coffee and sandwich at airport stalls, or almost an equal amount for car parking. The small service tax is not going to turn them to other modes of surface transport although air-passengers, like all consumers, may dislike fare increase. Actually, what has upset the domestic airlines cartel is not the service tax itself, which already existed for business class and international passengers, but the fact that its application will certainly restrain the operators from hiking basic fares at will to take advantage of the traffic boom, at least for now.

There is no doubt that domestic air travel in India is very expensive and the government taxes and levies are mainly responsible for this. The price of aviation turbine fuel (ATF), which accounts for the single largest operational cost of an airline, is some 40 per cent higher than its international rate. It is all because of the government taxes and levies. Taxes are high for international travel as well, accounting for almost 25 per cent of the total fare, including airport tax. Despite these factors, the domestic airlines business is booming. International travel out of India too is booming so much so that international air-carriers are using as many as 11 domestic airports for direct take-offs and landings. Most foreign airlines operate at high passenger load factor, higher than their average in other sectors. Price rise and global economic depression have hardly affected the spending habits of the creamy layer of the Indian society with deep pockets. The number of high spending Indians, who prefer air travel to rail or road travel for domestic destinations to cut travel time and also for better comfort, today is larger than the total population of some of the G-8 and G-24 nations. It is a huge number by any standard.

The civil aviation industry in India is growing at 18 per cent CAGR while in several rich countries it is showing either a negative growth or low growth. This is despite the fact that the domestic air travel in India is among the most expensive in the world. And, that explains why so many international airlines are interested in the Indian market. They are landing and picking up passengers even from mini-metro stations and small towns such as Kozhikode, Kochi, Thiruvananthapuram, Ahmedabad, Chandigarh and Hyderabad. International chartered flights regularly operate through Panjim, Goa, and Jaipur, Rajasthan. Lucknow, Pune and Bagdogra may soon be preferred destinations of international airlines. With India's popular holiday destinations now increasingly covering overseas locations like Bangkok, Phuket, Chiang Mai in Thailand, Singapore, Kuala Lumpur, Penang and Bali in the near-east, Male and Colombo in the south and Dubai in the near-west, there is a growing desire among airlines operators from these countries in India. But, it is India's lucrative domestic sector business that several foreign operators are really interested in but unable to fulfill the business ambition for the country's policy restriction against overseas airlines taking part in local operations, mainly for security reasons.

While India's civil aviation policy is a highly debatable document, the so-called security concern appears to be just a ploy to favour certain private operators against others. What security is the government talking about when foreign airlines have been allowed to operate through as many as 11 domestic airports? Such facilities to foreign airlines are not available in any country in the world, not even in the United States, a champion of the so-called 'open-sky' policy. International operations by airlines are almost mandatorily conducted on a reciprocal basis. Secondly, if foreign pilots can be freely engaged by India-registered private airlines to fly domestic routes, including geographically sensitive regions, what security or whose security is the government talking about? Two of India's highest traffic-earning domestic airlines, both privately operated, are not even run by resident Indians. No one is too sure about the real owners (stockholders) of some of the private airlines operating on domestic routes.

The most frightening part is the present debt position of India's airlines operators. The industry and the government estimates put the consolidated debt of the country's airlines at a whopping US$ 9 billion (Rs. 41,400 crore). A substantial portion of these loans are organised or syndicated through domestic banks. Indian Investors, including mutual funds, have big stakes in some of these civil aviation companies, which for not-so-clear reasons, are performing financially well below their potential despite a reasonably high passenger load factor. The combined loss of the Indian aviation sector, including Air-India, is estimated at $ 2 billion (Rs. 9,200 crore). This is scary especially in view of the past records of several joint stock companies in the business, which inflicted huge losses on their creditors, including many nationalized banks, suppliers and small and medium investors before they closed down. These failed private airlines included slain Kerala-born NRI Md. Wahid's East West Airlines, Delhi-based B K Modi's ModiLuft and Mumbai-settled hatchery baron Parvez Damania's Damania Airways. The debts of none of these failed airlines were anywhere near the existing domestic air-carriers, which also operate on international routes.

Although the airlines service tax is expected to generate additional annual revenue to the tune of Rs. 1,300 crore for the exchequer, it will not make much difference to the private sector cartel. The latter conveniently take shelter for all their inefficiencies and financial practices under the dark shadow of incompetent Air-India, which constantly hog the limelight in the aviation sector for all wrong reasons. Actually, it is about time that the authorities seriously revisit and revamp the civil aviation policy to recognize and tap the industry's true potential in the coming years and also to ensure its healthy operation. Official estimates based on the industry's existing business growth rate suggest the country would require at least 3,000 new aircraft and 400 new airports in the next 10 years to lift the additional traffic to be generated within this period. The entire world is watching India for its phenomenal air traffic growth. (IPA Service)