The journey of Civil Aviation in India began in 1932 when J.R.D. Tata flew the first weekly mail service from Karachi to Mumbai en-route to Chennai.  By 1947, private airlines were carrying 2,50,000 passengers in India.  However, this was not enough.  The air transport sector was nationalized in 1953.  Our national carriers, Air India and Indian Airlines were allowed monopoly over the skies.  A vast network of airports and airstrips was created.

            The monopoly regime in the public sector, while was suitable  for initial growth, gave rise to various systematic inefficiencies.  High tariff regime kept aviation out of the reach of a vast majority of our population.  A large number of airports/air strips remained unused.  On the other hand, the airports at major stations were unable to handle traffic.

            The need for greater liberalization was felt in 1989 itself when a new policy was enunciated.  The monopoly of national carriers was dismantled in 1994 and a large number of private carriers entered the domestic skies.  The increased competition led to greater connectivity, better services and higher growth.  Despite occasional hiccups such as the 9/11 aftermath and SARS scare in South East Asia, Civil Aviation has shown a healthy growth.                                                                                      

            Over the last few years, the civil aviation sector in India has been witnessing a boom as the domestic passenger carriage, cargo movement and International air traffic have shown exponential growth.  This growth has been largely fuelled by the policy of measured liberalization, which has been followed by Government on both domestic as well as International side.  After liberalization of the domestic skies in 1994, the  sector has seen increased competition resulting in significant growth.  Competitive tendencies have, in turn, resulted in adoption of aggressive, innovative pricing strategies and introduction of low cost models by some new airlines.  On the International side, Government has taken several initiatives to increase the availability of seats as well as better connectivity by liberalizing several bilateral agreements.  The year 2006 has been especially remarkable for the growth witnessed in passenger traffic.  The airlines have carried nearly 32.7 million domestic passengers in the year 2006, which is a growth of 47.5% over the corresponding period of 2005.  Further, scheduled domestic air services are now available to/from 76 airports as against 50 in the year 2000.   

            One of the biggest challenges in aviation lay in the Cargo Sector.  Today 40% of the world’s cargo business, in terms of value, moves by air.  India too is at the threshold of developing its air cargo business and moving high value goods and services across the country in freighters. This would particularly benefit the smaller cities giving a fillip to their economy.

            The tourist charter guidelines were significantly liberalized in 2004.  All airports in the country were opened for International tourist charters flights and Indian passport holders were also allowed to travel on the tourist charter flights.  Government have now further liberalized the tourist charter guidelines, the salient features whereof are as under:-

·    The restriction with regard to minimum and maximum length of stay of tourists in India has been done away with.

·    For outbound charters, the 2:1 condition between inbound and outbound tourists has also been removed.

·    Based on the representations received from the chartered airlines, the penal provisions have also been revised.  This is expected to further boost the tourist arrivals in the country.

            Another big challenge that the sector faces is that of infrastructure.   In the next five years approximately Rs.40,000-50,000 crore will be invested in developing the airports.  Mumbai, Delhi, Kolkata and Chennai airports are being upgraded and modernized.  The Greenfield airports in Bangalore and Hyderabad will become operational in the year 2008.  More Greenfield airports will be coming up across the country.  Work is in progress to develop 35 non-metro airports in the country.  Airports in the North East Regime and other far flung areas are being given high priority for development of various infrastructure facilities.  

The Government is planning to re-look at the airport policy to support and expedite the growth in airport infrastructure.  The Government also proposes to change the FDI policy in certain sectors of aviation to facilitate its growth.  The economies of scale will now justify huge investment in a number of areas relating to civil aviation like MROs, jet engine shops cargos, ground handling and other allied services.  After America, Europe and Japan, India is soon to become 4^th in the world to install satellite navigation system “GAGAN”.  This will enable India to handle higher volumes of air traffic with greater safety.           

            To keep the statutory provisions abreast with the international standards and the latest developments in the Civil Aviation sector, Ministry of Civil Aviation has drafted the Aircraft (Amendment) Bill, 2006.  The Bill, introduced in the Lok Sabha on 07.08.2006, provides for

·         Exercise of regulatory control on foreign registered aircraft for the time being in or over India.                                                                                                           

·         Empower the Central Government to make rules on: Licensing of personnel engaged in air traffic control ; Certifications, inspection and regulation of the communication, navigation and surveillance/air traffic management (CNS/ATM) facilities and  safeguarding civil aviation against acts of unlawful interference and ensuring civil aviation security.

·    Safety oversight functions to be performed by the Director General of Civil Aviation.

·    Violation of rules made under Section 4 to give effect to the Chicago convention shall also be punishable.

·    To enlarge the power of the DGCA to issue directions under Section 5A of the Aircraft Act.

·    Quantum of penalty for violation of the provisions of the Aircraft Act/Rules to be enhanced to imprisonment which may extend to 3 years and fine which may extend to Rs.10 lakh.

Taking note of the global trends in aviation industry towards mergers and consolidation of airlines and formation of global alliances, which enables airlines to optimize fleet acquisition, to leverage the asset base, to strengthen network and to achieve economy of seats, the Government approved the proposal to merge Indian Airlines and Air India.  Both the Airlines with their respective International and domestic network have a significant potential for achieving synergy.  It has been observed that most major International carriers have grown by ensuring seamless connectivity between international and domestic networks to build extensive access.  It was, therefore, felt that the integration of the two airlines could lead to developing seamless connectivity network of regional operations, short to medium haul trunk operations and long haul operations which will lead to an improved product through increased network coverage.  Their merger could also provide significant synergy for procurement, sales and distribution besides affording an opportunity for financial restructuring/ strengthening by leveraging common assets.  Further, the merger may result in creation of a much bigger airline, as compared to nearest domestic competitor, with dominance in domestic/international market position.

            Accordingly, a new company viz.  National Aviation Company of India Limited (NACIL) has been incorporated on 30^th March, 2007 with its headquarters at Mumbai.  The brand name of the new airlines will be Air India and its logo will be Maharaja.  The technical and procedural formalities for merger including integration of manpower are underway and it is hoped that the new company will start functioning shortly even as the merger process may continue for another 18-24 months.