An ‘India Inc’ Approach

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Tony Tyler, IATA’s boss, has called for an ‘India Inc’ approach to resolve India’s aviation crisis and improve competitiveness to drive economic and social benefits.

Tony Tyler, Director General and CEO of IATA.

Addressing the Confederation of Indian Industry in July, Tony Tyler, IATA’s Director General and CEO said: “Indian aviation is in a multi-faceted crisis.  Before aviation can deliver greater benefits to the Indian economy, this crisis must be resolved with coordinated public policies.  It’s time for a grand plan to build India’s aviation future and thereby strengthen the Indian economy.  To do that, we need an ‘India Inc’ approach that addresses the crippling issues of high costs, exorbitant taxes and insufficient infrastructure.”

Aviation is estimated to support 1.7 million jobs, 0.5% of GDP and 90% of international tourist arrivals in India.  Mr Tyler commented: “That’s impressive, but it could and will be much more.  Today, India is a market of about 100 million passengers annually.  Looking ahead, if Indians travelled as much as Americans, we would see a market potential of over 2 billion travellers.”  Despite this great potential, India’s airline industry is struggling financially.  IATA says that Indian airline losses approached $2 billion for the year ended March 2012, after losing an estimated $3.5 billion over the three previous years.

“A bright future is at hand for Indian aviation if we can find common purpose among all stakeholders.  India must not settle for a bronze medal in global aviation.  If we can take deliberate action on a handful of critical issues – reducing taxes, ensuring capacity and keeping costs in check – a gold is entirely possible.  And the benefits of such an effort will be shared across the entire economy,” Mr Tyler added.

He then called for urgent action regarding costs, taxation and capacity, stating: “The high cost of doing aviation business in India is squeezing the lifeblood out of the airline sector.  Infrastructure costs and taxes need urgent attention.”  Regarding airport charges and fuel taxes, he added: “India’s airports are becoming increasingly expensive.”  The Airports Economic Regulatory Authority (AERA) approved a 346% increase in charges at Delhi Airport, effective from May 2012.  The increase is estimated to add over $400 million in operating costs for airlines providing connectivity to India through Delhi.

Mr Tyler commented: “An increase of this magnitude will impact travel demand by 5-7%.  That’s bad for airlines, for passengers, for Delhi International Airport Private Limited (DIAL), for the Delhi hub, for the city and indeed for India and its economy as a whole.  We need to focus on how to make Delhi a more competitive airport, a successful hub and a major driver of economic growth.”

To operate the city’s airport, DIAL pays 46% of top line revenue to the Airports Authority of India (AAI) as a concession fee, much of which is used to subsidise other public sector airports.  “This is in contravention of international standards, distorts competition and compromises Delhi’s cost competitiveness,” said Tyler, adding: “I urge the government to initiate deliberations on utilising the 46% concession fee to offset the increase in aeronautical charges and the cost for passengers.  This could be the basis for a way forward that protects the interests of DIAL, its airline customers, the fare-paying public, and the economy.  And it is important that we find a workable solution soon to avoid Mumbai, with a similar concession structure, falling into the same dire situation.”

This entry was posted in Airline Focus, Airports, Features.

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