India has long been a promising market for commercial aviation. Limitations have come from infrastructure (too few airports) and an interfering government. Another source of difficulty for India’s hard-pressed airlines has been fuel prices. Airlines face a myriad of taxes on fuel. Sometimes this could mean paying up to 50% more for fuel than in competing markets. Fortunately the decline in oil prices have given the industry a boost. Fuel charges constitute 50-60% of the total operating costs for Indian airlines. For members of The Association of European Airlines members fuel costs are at 33% of operating costs.
We have looked at this market before and still think India is ripe for more turboprops. India taxes fuel for jets differently than for turboprops. The latter are fortunate that they much less for fuel. This should be a big incentive to add turboprops to fleets.
Consequently it is with interest that we see India’s airlines are considering adding more smaller aircraft. This should be great news for ATR and Bombardier. India’s commercial aviation sector can quickly connect many communities with its hubs. This will speed up economic development. India wants to follow the economic progress that China and that will require a far more aggressive deployment of aviation assets. Turboprops should be, in our view, a key part of that strategy.
India only has 12 international airports and has a total of 63. State and central governments need to move on infrastructure development. A country the size of India needs more airports. China has 140 and the United States has over 15,000. Infrastructure is very important.
The quickest way for India to connect communities to its larger economy is by allowing airlines to add turboprops. But even as government should enable this, it should also reduce its other roles. Specifically this includes perpetual funding for state owned Air India. Forcing the taxpayers to keep Air India going is a burden on private airlines as well, which have to compete using commercial financing. The role of the state in Indian aviation complicates and limits the growth potential of an industry that could play a major role in national economic development.