The aviation industry is the worst hit globally because of COVID-19, with an estimated loss of USD 500 billion in revenues this year. Actions taken by governments reflect both the concern and importance the sector holds in the economic landscape. While the stark differences in financial bailouts and support lines across countries, discernibly skewed towards flag carriers, run the risk of causing permanent distortions in the marketplace, the inevitability of these measures is undebatable given the colossal economic fallout of losses across the value chain.
In May, the Finance Minister announced some important policy initiatives to address pending demands of the Indian aviation industry, but these fell short of providing sustainable financial support to struggling carriers or a clear trajectory for reform of the sector to unshackle growth deterrents.
The core issue dominating discussions for many years has been the high-cost structure of the industry. A theme that has never been more relevant than now as businesses are fighting hard to conserve cash and remain alive in a fiercely competitive and risk prone industry. Reduction in GST rates for MRO businesses has provided timely relief but rationalization of customs duties and taxes on ATF remain unaddressed. It is also important to focus on structural reform to wrest competitive advantage where possible.
India’s GPS Aided GEO Augmented Navigation (GAGAN) program, believed to be the world’s most advanced air navigation system, offers the possibility of a quantum shift in service levels, costs of operations and delivering benefits to aviation and other stakeholders. The project implemented in collaboration with the Airports Authority of India was intended to make flying safer, faster and cheaper. Sadly, this pioneering, state-of-the-art technology built by ISRO remains largely unutilized five years after it was commissioned and certified for commercial use.
GAGAN was developed and commissioned at a cost of around $115 million. It is also interoperable with other satellite–based systems such as WAAS (US), EGNOS (Europe) and MSAS (Japan) giving it the ability to provide seamless services across global airspaces. Its coverage extends from West Africa to Eastern Australia, which makes interested users within this hemisphere beneficiaries of the system. Most importantly, while it is primarily developed for air navigation purposes, it can extend significant benefits to many other sectors like defence, surface transport, agriculture, mining, telecom or disaster management across geographies.
Preliminary estimates by KPMG indicate that direct economic benefits accruing to aviation stakeholders could be USD 2-3 billion per annum from infrastructure and operational cost savings. For example, it would obviate the need to have instrument landing systems (ILS) at smaller airports with limited air-traffic movement, avoid flight diversions, save fuel for airlines and bring down air navigation charges as an outcome of optimised ground infrastructure and manpower. Monetized economic benefits for other non-aviation users could be much higher depending on the nature of applications and the number of users. The biggest beneficiaries of this initiative will be general aviation and helicopter operators who depend on visual flight rules (VFR) and cannot perform night operations, reducing their utility in many terrains. Interestingly, as we move into the drone world, making unmanned aerial systems (UAS) GAGAN compliant to navigate hitherto unexplored air spaces can become a game changer. An important policy imperative that needs to find a place in the imminent UAS policy.
Since 2016, MoCA has made earnest efforts to get Indian carriers to install GAGAN equipment within target timelines. Unfortunately, they have gotten deferred consistently in the absence of adequate buy-in from all stakeholders.
An important next step is to have GAGAN-based approach procedures (LPV and APV, which are CAT I IFS equivalent) tested and certified by DGCA for various airports. It is reliably learnt that more than 120 such procedures have been developed by AAI and are ready to be tested. Testing needs aircraft equipped with GAGAN receivers and pilots to run these approach procedures. This should not be a problem since there are commercial aircraft with the equipage and crew to carry out these runs.
A big deterrent for airlines is the cost of retrofitting and forward fitting of aircraft with receivers and equipage. The concern on cost has been aggravated because of COVID-19 and the uncertain recovery path. But the rub of the green is really the unprecedented window of opportunity that the current situation allows for retrofitting of aircraft. With less than fifty per cent of the legacy commercial fleet likely to be operational in the next two quarters, OEMs and airlines can work together with regulators to complete fitment and certification for aircraft on ground without much effort. A share of the current fleet is already SBAS compatible and newer aircraft on order can be delivered pre-fitted with this capability. KPMG’s ballpark estimate of the cost of equipage, testing and training for the current commercial fleet is USD 200-250 million.
The big question that remains is who bears the cost? This is where the government needs to step in and make some strategic decisions. If the government or competent authority can extend financial support to airlines and other users in the form of a soft loan with appropriate fiscal incentives and credit lines, it would encourage airlines and other users to patronise and comply with the requirements in this golden window. The potential cost savings and revenue streams from both aviation and non-aviation users will make this financial arrangement eminently feasible.
GAGAN is an initiative unlike others. Its long-term benefits far outweigh the costs of development and compliance. It also brings into sharp focus the opportunity cost of a dormant project that has already consumed a significant chunk of tax-payers’ money for a technology that can deliver sustainable value to both aviation and non-aviation stakeholders.
A full roll-out of GAGAN should now become a national priority. Given the right set of wheels, it will help the industry come back stronger and more competitive in the new post COVID-19 normal. This window may never come again. We need to act now and create a better future.
A version of this article was carried by The Economic Times -TravelWorld.com on 04 July 2020