The International Air Transport Association (IATA) has urged the Indian government to address the issues of high fuel and service tax as well as cost and infrastructure, to remove the shackles of the aviation sector.
Equally important is giving a go-ahead to the Civil Aviation Ministry's proposals to allow up to 49 per cent direct investment by foreign carriers in Indian airlines. Such strategic tie-ups have strengthened airline groups in other parts of the world, IATA Director-General and CEO Tony Tyler said on the second day of Indian Aviation 2012 here on Thursday.
At the same time, Mr. Tyler cautioned that allowing foreign airlines to invest in Indian aviation was not a panacea. Without addressing the other three pillars — airport costs, taxes and infrastructure — FDI might only end up as a theoretical exercise.
“Jet fuel constitutes 48 per cent of airlines' expenditure while it is 30-32 per cent around the world. The problem is not about the fares but the cost,” he said while referring to the 340 per cent hike in charges by the Delhi International Airport. “The sector should become competitive to sustain itself,” he added.
The Civil Aviation Ministry's intent for resolving these issues could be addressed only through coordinated effort among all ministries — Tourism, Finance, Environment and others — and a common vision. Mr. Tyler made these candid remarks during his key note address and later at the media interaction.
“The industry is now in crisis. Air India, the national carrier is on life support, the difficulties of Kingfisher are well known and the sector, as a whole, is not generating sustainable profits even in the high growth market of 12 per cent domestically and 9 per cent internationally,” he said.
On the potential of the Indian aviation sector, he said that against the average air travel of 1.8 times a year by people in the U.S., in India it was 0.1 trip a year, that is, one trip every ten years. Aviation was responsible for 0.5 per cent of India's GDP as it was the backbone of trade and tourism and supported 1.7 million jobs. With a huge middle-class advantage, aviation sector's growth would boost Indian economy, Mr. Tyler said.
