Fasten your seat belts

The biggest challenge for policy makers and private firms is to get profit motive to marry policy motive; move from a position of ‘versus’ to a posture of ‘with’. Which in turn will, according to the World Bank, depend upon, among many other things, “the political consensus for private provision.” It’s not in India alone that such objections are raised. Read the Annual Privatization Report by Reason Foundation and you’ll see the US Right incumbent airlines mirror India’s Left incumbent workers — the former, exercising a veto power given to them, have stalled privatisation of many airports. Once incumbents, the biggest bane of any reform, are out of the way, the paths to privatisation are many. In India, while Delhi and Mumbai airports have been given out on 30+30 year leases, Cochin, Hyderabad and Bangalore have seen equity sales. And as Chennai and Kolkata get ready to join them, we wait to see how potholes on airstrips morph into catalysts of growth.

Expectations of this growth are telling. According to Centre for Asia Pacific Aviation, over the next four years, growth of international and domestic traffic will be 20-25 per cent per annum. Cargo traffic is not lagging either: it is expected to grow by 26 per cent per annum to 3.3 million tonnes. Meanwhile, the Indian economy, among the world’s fastest, is finding hard to squeeze into low-capacity airports. Will global investors have to take the Garib Rath to explore opportunities in India? While important policy changes have been initiated, the new civil aviation policy is almost out of the hangar. Up next: an integrated national transport policy.

To maximise such enabling mechanisms, airlines will have to improve their productivity — Air- India’s employees per aircraft, at 398, are more than five times China Southern Airlines’; Jet Airways’ 223 are more than four times Japan Airline’s (domestic). Time is short — 2008 is expected to be the year of consolidation. Is M&A, therefore, the flight to scale? As the sector takes off and more entrepreneurs line the runways, many will hit the stock exchanges to raise money, inviting households to share wealth creation — or destruction. (Internationally, Southwest Airlines has been one of the top performing stocks over the past three decades, even as the global airline industry turned in losses of $8 billion last year and four of the world’s top 10 airlines filed for bankruptcy.)

Ladies and gentlemen, we welcome you aboard this flight of Express Survey. Over the next few pages, you will get an overview of what’s going on in India’s airports, airlines, cargo and stocks, apart from a satellite view of the globe. Please fasten your seat belts.