Facts:
- Air travelers in India = 70 million (2015) will increase to 220 million by 2025.
- International traffic will increase from 51 million to 120 million (2025)
- As of now almost 50% expense of airline are due to fuel costs, as total tax on jet fuels is around 45%. Some states levy as high as 30% tax on ATF.
Action Needed:
- Increasing investment in airport infrastructure
- Airspace management
- Skill development in the sector to meet massive demand of future
- Second airport in major metros to meet the future demand
- Bringing jet fuel prices down to international levels
- Abolishing the route dispersal guidelines (RDG), the 5/20 Rule
- An Essential Air Services Fund (EASF) needs to be set up to provide direct subsidies for loss making routes and taxes for aircraft maintenance need to be zero-rated
- Dwell time for cargo handling has to be reduced from three days to three hours and helicopters and small aircraft have to be promoted for last mile regional connectivity
Administered Airline prices:
Question : The government plans to limit airfares for hour-long flights to Rs 2,500. Should such administered fares be imposed? Discuss. (200 Words)
No, they should not be administered:
- It is based on assumption that it is only fares of flights of less than one hour that jump during emergencies is flawed
- Logic of such government intervention is unclear as air fares can be kept under check on a case-by-case basis when crises demand it — especially when airlines have shown themselves willing to cooperate in the past
- Capping air fares as a market-building tool betrays a fundamental misunderstanding of the price-demand equation. Dynamic fares offers consumers a wide choice and promotes healthy competition
- Administered fares also have a discriminatory impact in two respects:
- it diminishes business for the railways, which should arguably be the transport solution of choice
- ends up subsidising classes of consumers – the rich and middle class – who don’t need price protection
Yes, it should be done:
- It would help strengthen regional air connectivity
- Has the potential to spread traffic beyond the metros to smaller towns and cities
- During emergencies like the recent Chennai floods the airlines charged exorbitantly. These kind of malpractices can be checked. As of now, last minute fares can sometimes be over 10 times the lowest average
- India can emerge as the world’s third-largest aviation market if the country enables its 300 million middle class people to travel by plane “at least once a year” by initiating the above measures
- It will lessen congestion on roads and railways