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Remarkable growth ahead for Indian aviation sector, with some challenges - LCC Symposium wrap

(MUMBAI: 10 October 2005) The second annual Indian Subcontinent and Middle East Low Cost Airline Symposium concluded on 7 October in Mumbai, with all participants recognising the remarkable growth of the Indian market and the need for continued liberalisation of the sector.

Peter Harbison, Executive Chairman of the Centre for Asia Pacific Aviation, the symposium organiser, noted that the upbeat mood at the event reflected well the growth prospects of the Subcontinent’s industry. “It was gratifying to see the sustained level of confidence in the Indian industry, especially in light of a backdrop of continuously rising fuel prices,” he noted.

While belief in the strong fundamentals of the sector was universally held, there were differences as to what the future would bring, as regards the specific shape the market – and the identities of its players.

There was unanimous support for the Indian government to limit its participation in the industry, both as a regulatory force and as a fellow competitor – but there were subtle differences in the reasons for this view.

Not surprisingly, several chief executives from privately-owned Indian carriers expressed frustration at the government’s continued officiating of an industry in which it is a lead investor and operator. But, while their protestations were born of self-interest, Mr Harbison offered a different view to support the need for reform.

“It is in the Indian Government’s own best interest to reform operations at [state-owned] Air India and Indian Airlines quickly, probably even merging them in the near future. With the recently enhanced access and route opportunities offered to private carriers, the state has unleashed forces that could well overtake its flag carriers if they don’t address their basic structures. They have a window of opportunity while the competition is still finding its feet, but that window won’t stay open long”, he said.

In a well-received presentation on airline restructuring, the Centre’s CEO, Andrew Miller, explained that even if the government chooses to divest itself of its underperforming airline assets, it would do well to heed the lessons provided by the experience at other flag carriers undergoing reform.

Mr Miller illustrated that the initial steps of restructuring both require relatively little pain on the part of patient – usually entailing aircraft and crew utilisation enhancements, not retrenchments – and also that the positive impacts boosts the value of the reforming carrier ahead of a possible privatisation.

The Centre is now making the final preparations for its next event, the Asia Pacific & Middle East Aviation Outlook Summit 2006 in Kuala Lumpur, Malaysia, on 5-6 December 2005. This year the theme is “Towards Best Practice: Maximising Revenues and Minimising Costs”.

Mr Harbison stated that the Asia Pacific & Middle East regions have continued to outperform the rest of the global aviation markets and this success story could continue in 2006. Bur Mr Harbison warned that while the focus recently has frequently been on cost reduction, equally important is the ability to maximise revenues. “We look forward to hearing the secrets of success by the airlines, airports and other industry leaders who have led the way in 2005”, said Mr Harbison.

The Summit will also feature the Annual CAPA Asia Pacific Awards for Excellence, to be presented at a Gala Dinner on 5 December.

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