Wednesday, November 01, 2006

Must-reforms for civil aviation in India

Not unexpectedly, airlines are in cut-throat competition and bleeding each other with the government stepping in to set the house in order. Ajay Shah has written a good insightful piece on the need of competitive markets in Indian aviation sector at Revel in Competition. Read other related articles at his blog here.

Ajay Shah has suggested three reforms which I will interpret as follows
  1. Disband Ministry of Civil Aviation
  2. Open-skies foreign policy
  3. Competition (Unlimited) Commission
There are two more crucial points that could have been added to the reforms on the basis of market allocation of resources.

Dismantle route dispersal guidelines
Commercialize aviation infrastructure

Allow private airports to be set up or speed up the process of airport siting and private financing. Let the rule of law handle the issues of environment and noise. Next, commercialize the Air Traffic Control Systems. As of now, both airports and ATCs are managed and funded by the government. Let them move into the private sector. In the short term, opt for peak-load pricing at congested airports.

A lesson from the deregulation of the airline industry has been that airlines followed the hub-and-spoke model. Development of satellite airports in India can hugely increase airline performance by facilitating this model.

For further understanding of the problems affecting the civil aviation sector in India read the Road Map for the Civil Aviation Sector which does come across as illuminating.

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