16-Mar-2012 8:13 AM

IATA notes potential of growth in India but challenges of taxes, airport charges and infrastructure

IATA called (15-Mar-2012) on India to develop a common vision for Indian aviation expressed in a National Aviation Policy with a strong implementation plan. “Indian aviation has tremendous potential to drive economic growth in the sub-Continent. But to realise this, India needs a common vision for aviation—expressed in a National Aviation Policy strongly linked to an implementation plan. Such a policy would need to re-build competitiveness by addressing the difficult issues of tax, cost, investment and infrastructure,” IATA director general and CEO Tony Tyler said. Details include:

  • Economic benefits of aviation: Aviation is responsible for 0.5% of India’s GDP and supports 1.7 million jobs. People on average in India make 0.1 trip per year, or one trip by air every 10 years, compared to 1.8 times per year in the US. Mr Tyler noted, “Aviation’s contribution to the India economy could be much more. If India’s 1.17 billion people traveled at the same frequency as in the US, a market of 2.1 billion travelers would be created. Even one-third of that would be an air travel market of about 700 million, rivaling that of the US".
  • Four pillar agenda: IATA suggested a four pillar agenda to build competitiveness:
    • Taxes: Mr Tyler noted the "damaging effects" of jet fuel taxes in India. All fuel is subject to an 8.24% excise duty and domestic services face state fuel taxes of up to 30%. As a result, fuel represents an average of 45% of operating costs for India’s airlines, compared to a global average of 32%. Mr Tyler also urged the removal of Service Tax on both tickets and on services that airlines purchase, to align with international principles and boost competitiveness;
    • Infrastructure: Mr Tyler highlighted the need for capacity expansion in Mumbai
    • Cost: Mr Tyler urged the Ministry of Civil Aviation (MOCA)to intervene in the discussion of "unacceptable" proposed charges increases at Delhi International Airport. Mr Tyler also urged that (1) any legitimate revenue claw-back under the current regulatory structure be spread across a number of years no in the next two, (2) an urgent review should look at the structure of charging for international versus domestic and (3) there should be a review of the allocation of aeronautical and non-aeronautical assets to be more in line with other major international airports;
    • Investment policies: Mr Tyler urged the positive consideration of MOCA proposals to allow up to 49% direct investment by foreign carriers in Indian airlines;
  • Outlook: Mr Tyler expressed optimism that India has a "promising aviation future" if these issues can be addressed, commenting, "I am an India optimist. IATA will be fully engaged in the team effort to turn Indian aviation into the great success story that it has the potential to become. India should not settle for a bronze medal in the world of aviation. It has pure gold potential". [more - original PR]

IATA: “The high cost of jet fuel has been hijacking the competitiveness of the Indian air transport industry for over a decade. It is now clearly recognized by all that fuel taxes are sucking the life blood from the Indian aviation sector. The industry is now in crisis and we need a coordinated effort among all Ministries—at national and state levels—to restore competitiveness,” Tony Tyler, director general and CEO. Source: Company statement, 15-Mar-2012.

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