India rallied around daunting adversities even as the country’s aviation industry struggled to retain its cheer amid the gathering gloom

Nearly as perilous as attempting to predict the future is trying to assess the year that has just ended. The occurrences and images of the past 12 months are still vivid in the imagination and it is perhaps tempting to assign undue importance to events that will ultimately subside to mere ripples in the sands of time.

Even so, which other year has seen such a spectacular rise and equally precipitous fall in the price of oil? Which year has seen such dramatic drops in passenger numbers? Which year has seen so many airlines fold up across the world even as many others were pushed to the brink? The double whammy of rising prices and falling demand created what the IATA’s Giovanni Bisignani recently termed “perfect storm” conditions. Though the price of oil has dropped sharply off its peak of July, few are willing to predict a revival of passenger demand any time soon.

Best & Worst of Times
However, the year began on a bright note. In January, Virgin Galactic unveiled the final design of SpaceShipTwo, a sub-orbital spaceplane intended to give well-heeled tourists a two-and-a-half hour long out-of-this-world experience. Virgin Galactic is offering tickets aboard the spaceliner for an initial price of about $200,000 (Rs 95 lakh), though its Chairman, Richard Branson, says the cost is expected to drop significantly after a year of operation. As many as 200 potential passengers have already paid up and around 65,000 are eagerly awaiting their chance. When SpaceShipTwo takes to the air, probably in 2009, it will blur the boundary between air and space.

At the other end of the commercial aviation industry’s spectrum, the fledgling very light jet (VLJ) fell upon hard times. While Cessna progressed with deliveries of its Mustang VLJ and Embraer continued to accumulate orders for the Phenom 100 which is yet to receive certification, other manufacturers didn’t fare so well. Adam Aircraft went bankrupt in February and air taxi company DayJet suspended operations in September. Perhaps the biggest blow was Eclipse Aviation’s bankruptcy in November, rendering the future of the enthusiastically received Eclipse 500 rather bleak.

Does 2008 mark the beginning of the green age of the aviation industry? In March, Virgin Atlantic successfully tested a 20:80 mix of biofuel and Jet-A in one engine of a Boeing 747 on the London-Amsterdam route. The advantage of using a blend is that it does not require major engine alterations. In September, Air New Zealand demonstrated how an optimised descent at the end of a long-haul flight could save remarkable amounts of fuel. Air New Zealand rounded off the year by successfully using a 50:50 blend of jatropha and Jet-A1 in one engine of a Boeing 747 in the vicinity of Auckland. Incidentally, India and Africa are shaping up as prime sources of jatropha.

In July, the European Parliament voted in favour of including aviation in the EU Emissions Trading System from 2012. Under the new scheme, greenhouse gas emissions from flights to, from and within the EU will be included in the system. All airlines will be covered whatever their nationality. Yet, compromises during the drafting phase failed to make the proposal effective and experts feel the deal will offset just one year’s growth in emissions from aviation.

The big story of the year, of course, was the fuel price rise that triggered dramatic shrinkage of carriers, savage slashing of schedules, pink slips for employees, unexpected mergers, bankruptcies and failures and disgruntled passengers. The steep fall in price to less than a third of its peak by the end of the year brought some cheer. However, the global economic crisis (which many economists predict is set to intensify in 2009) put paid to any hopes of a recovery in passenger demand. The volatility in fuel prices meant that airlines hardly knew what to plan for from month to month and by the end of the year, the fervent prayer of most airline executives must have been that oil prices remain constant and that the constant price is very low.

When in crisis, consolidate
A year ago did someone say that China and India had economies strong enough to weather a US recession? Not any longer. Both have suffered dramatically and their airlines are among the worst affected. Chinese airlines are in deep trouble and have demanded cash bailouts. They are likely to get them, but with strings attached—strings that are quite likely to lead to consolidation in 2009 or 2010. The Indian airline industry is in the same boat, although traffic has slumped for different reasons. Many airlines that were undercutting each other aggressively in the fight for market share, and growing rapidly in the process, used up their cash reserves. From mid-year, demand fell substantially and the same airlines were forced to increase fares, practically eliminating low cost travel.

Consolidation offered the best survival strategy. A blockbuster alliance between Kingfisher Airlines and Jet Airways—bitter rivals thus far—was a sign that desperation was setting in. Towards the end of the year they began to claim that they could break-even this year, a claim that should be taken with a pinch of salt. Some airlines made it known that they were preparing to lay off employees by the thousand, only to backtrack under intense government and political pressure. IATA projected a cumulative loss of $1.5 billion (Rs 7,248 crore) for Indian carriers this year. Yet, no airline in India declared bankruptcy, although 31 airlines folded up across the globe.

At the very end of the year, most Indian carriers finally succumbed to government pressure and announced attractive and substantially reduced fares. The sharp fall in the price of aviation turbine fuel was one reason. The other reason was the steady fall in passenger traffic. Only 30 lakh passengers flew in November 2008, an amazing decline from the 38 lakh who took to the skies in the same month the previous year.

On a brighter note, the first Indian civilian air show, India Aviation 2008—an International Exhibition and Conference on Civil Aviation organised by the Ministry of Civil Aviation along with FICCI—was held from October 15 to18, 2008 at the Begumpet Airport, Hyderabad. The show certainly received an enthusiastic response from the citizens of Hyderabad, but that was it. Not a single new order was announced by the two manufacturing giants, Airbus and Boeing, though both maintained their market forecast expecting India to buy another 1,000 aircraft over the next 20 years. However, on the infrastructure front, the nation was gifted with two world class Greenfield Airports at Hyderabad and Bangalore. Upgrade of two of the busiest international airports at Mumbai and Delhi made considerable headway.

Many Firsts & Some Fears
There were several space triumphs in 2008. NASA, celebrating its 50th birthday, landed on Mars, photographed distant worlds, added to the International Space Station and, incredibly, took part in a lunar science mission with India. The Indian Space Research Organization (ISRO) continued its remarkable progress by launching Chandrayaan-1 on October 22 from Sriharikota—a textbook launch if ever there was one. It entered lunar orbit on November 8. In a historic event on November 14, the Indian flag was placed on the Moon’s surface; the Tricolour was painted on the sides of the Moon Impact Probe, one of the 11 payloads of Chandrayaan-1. Next stop Mars, claims a jubilant ISRO.

Without going into the politics of the deal, the Indo-US civil nuclear agreement brought cheer, ending as it did the era of defence technology apartheid practised against India by the US and many of its partners in the western alliance. However, it could still be a decade or more before the ghosts of technology denial regimes are finally buried. The IAF will be a direct beneficiary, because long coveted technological capabilities will now be within grasp. The other defining military event was the IAF’s participation in Exercise Red Flag 2008 in August. A 247-strong contingent of the Indian Air Force participated in the 15-day multinational exercise at the Nellis US Air Force Base.

The Indian Air Force (IAF) inked a number of other agreements for aircraft and advanced weapon systems during the year, leading the Chief of the Air Staff, Air Chief Marshal F.H. Major to proclaim: “The pace at which we (the IAF) are going ahead with our modernisation plans, the world will see a very capable and different air force in seven to 10 years.” In February, in a small step with major implications for pilot training, the IAF received its first indigenously built Hawk Mk-132 Advanced Jet Trainer, manufactured at the state-owned Hindustan Aeronautics Ltd (HAL). At last combat pilots can be trained on the advanced platform they deserve.

No account of India in 2008 can be complete without mention of the dastardly terrorist attack on Mumbai on November 26, which has the potential to be as defining an event for the country as 9/11 was for the US. However, one immediate difference from 9/11 is that on this occasion there was barely any drop in the number of air passengers. With the Centre receiving intelligence inputs warning about terrorist plans to next hijack a plane or take control of non-functional airports for aerial attack, security was further intensified at all airports.

It is hard to think of a year that has had a more profound impact on the worldwide airline industry as 2008 has. Will it prove to be a watershed for aviation? Only time can tell.

Without going into the politics of the deal, the Indo-US civil nuclear agreement brought cheer, ending as it did the era of defence technology apartheid practised against India by the West