India has been going through an infrastructure crisis especially when it comes to airports hence seeking help from the private sector to be able to keep up the air-transport facilities in the proper functioning form it is decided to privatize the airports. Additionally, depending on the private sector to maintain and improve our air-travel infrastructure. Hence privatization of airports has been sought as the solution. However, The IATA chief has expressed that there has not been a single privatized airport that has lived up to the desired expectation. Concerns are being raised when it comes to aviation infrastructure. IATA which is a global airline body has advised not to depend on privatizing airports as the ideal solution. Long term effects are needed to be evaluated before privatization airports in India.
Private vs Government
The consumers of the airlines would end up paying a much higher cost for their services. Moreover, if the six important airline services in metropolitan cities and state capitals are privatized. Even after spending a large amount of public money to improve the aviation sector then price hikes are inevitable.
The civil aviation ministry, along with the Planning Commission, has been contemplating and considering shifting the ownership of the airline operations and development of Airports. The shift of Lucknow, Ahmedabad, Jaipur, Chennai, Kolkata, and Guwahati airports to private companies. These airports are being operated under the Airports Authority of India (AAI).
Why Privatization of Airports is a Mistake
1) Higher cost
The International Air Transport Association (IATA) has expressed serious concerns over India’s move to privatize its airports without shareholder consultations. IATA said that any unnecessary privatization of airline services would increase the attention of private companies on profit- maximization resulting in an increase of airfares.
The privatization of airports of Lucknow, Ahmedabad, Jaipur, Chennai, Kolkata, and Guwahati would only lead to an elevation of prices of air-tickets and other services. The parliamentary committees in charge of transport and the public sector are already warned by the IATA of the potential hikes.
Privatization of Delhi and Mumbai Airports in the past had witnessed sudden hikes in the prices of the flight tickets and reduced passenger volume of the aircraft. It is important to avoid such mistakes and prevents history from repeating itself.
2) Reduced efficiency
It is a possible outcome that one bidder might get the contract for the operation of two or more airports. Projects such as the development of an airport are quite a money intensive. The downside of such a scenario would be that the contractors would lag behind and unable to fulfill their duty. The purpose of privatizing an airport would become invalid. The decline in performance is a probable scene in such cases.
3) Abusing market power
Another possible scenario that arises out of the same company getting the development project for the same aviation facility is that there would be a reduction of competition. Furthermore, the market power of the particular company would increase which increases the chances of misuse of this power. The private company can utilize this strength to set its own prices and cause a hike in the cost of its tickets and services. The consumers will not be on the benefiting side of the deal when it comes to privatizing airports. Bidders are needed to be compared based on their financial capacities and their promises. When the developmental project fails, the contractor is the one who is affected the most, due to having more than one or two airport developments project under them.
What can be done
1) The airlines and their, representative associations, and consumer groups should be consulted before any change regarding the shifting of ownership of the aviation facility could take place. Moreover, there should be more options explored when it come s to ownership besides the privatizing of the airline. This suggestion has been made by the IATA themselves. It is for those governments who are deciding to seek the help of the private sector to maintain the aviation infrastructure.
2) A thorough evaluation must be done before any shifting of governance could take place. There needs to be an analysis of positives and negatives of various different models that can take care of the airline development project. The interest of the customers and the capacities of the bidder needs to be taken into account.
3) More attention is needed on the policies and initiatives with the purpose of enhancing and benefiting the aviation sector. Promises of high returns from the airline projects, to the private companies, should not be made. The focus should be on elevating the Indian economy through the generation of high traffic and the volume of passengers. Back in 1991, when India introduced new economic policies (LPG) to improve its growth it had proved to be beneficial. Similarly introducing privatization again is considered to have an impactful change in the Indian economy.
4) Aviation infrastructure development Projects would benefit if these are allocated to different ownership models and companies. This strategy would increase competition. Moreover, there can be any failure with the project. The impact of the financial loss would be restricted to a level and not affect the company as much as it would have had if more than one or two Airline projects.