Aviation industry needs regulatory re-think: Experts

With a new government having come to power, there are hopes that the languishing airline industry in India will see better days. Aviation experts suggest that there is  need to take a serious look at the regulations governing the sector. The Director General of Civil Aviation (DGCA)  exercises sweeping control without taking the airlines' interests into consideration, they feel. A recent example is that of the DGCA summoning the recently launched AirAsia India's management over the issue of unbundling of fares, a practice that is common across the globe.
 
The aviation sector is generally believed to be over-regulated. There is the The Aircraft Act (1934) along with Indian Aircraft Rules (1937). These ancient acts do not take into account the leaps that the industry has taken. There is excessive concentration of power in the Director General of Civil Aviation or the DGCA through which the Central government exercises its authority.
 
Experts like Peeyush Naidu, Director at Deloitte in India holds that setting up of a Civil Aviation Authority (CAA) replacing the DGCA by enacting new legislation would be a key milestone. In fact this was one of the major civil aviation reforms that the UPA government initiated but left unfinished.
 
"The CAA, as an agency with greater operational and financial autonomy than available to DGCA, could be expected to work towards strengthening procedures and compliance to international standards," Naidu says. It gains greater relevance now since US' Federal Aviation Authority has downgraded India's safety ranking to Category II status. "It is important to expedite the setting up of the CAA," he adds.
 
Not everybody though roots for amendments to the Aircraft Act (1934). Aviation experts like Kapil Kaul who heads the aviation advisory and research firm CAPA says a new Act and not just amendments is what is needed.
 
"It (the new Act) needs to be comprehensive and include safety, security, economic, environment, competition and other aspects of modern aviation. Recent amendments are not as detailed and comprehensive. It needs to take all aspects of modern aviation into consideration," he says. The body in its recent report on Civil Aviation Agenda for the New Administration (May 27) says that there is a need for independent reviews into the state of the industry to understand the deep structural fault lines and to identify solutions. In fact CAPA says that weakness of the institutional framework is one of the core underlying problems and it gets accentuated by a lack of a comprehensive Civil Aviation Policy.
 
Amber Dubey, Partner and India Head of Aerospace and Defense at global consultancy KPMG says that commercial airlines should be allowed to fly on routes that remain commercially viable for them and not dictated to by the current Route Dispersal guidelines. The government must move out of too much interference in issuing of licences for pilots and also aircraft procurement as some of the procedures create bottlenecks and result in delays.  "There should not be any financial burden on the airlines based on the subsidy model. Airlines must be allowed to make money and plough it back through profits to fly routes of their choice," he says.

"A failure to set-up the long -term structural competitiveness and viability of the industry will have serious repercussions for economic growth and employment generation," warns CAPA.