IATA SUGGESTS NEW BAIL OUT APPROACH

While delivering the keynote address during a seminar ‘Building the Future of India Aviation’, organised by industry body Confederation of Indian Industry (CII), Tony Tyler, Director General CEO, IATA stated that the 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.” Tyler urged that there was a need of an ‘India Inc.’ approach that addresses the crippling issues of high costs, exorbitant taxes and insufficient infrastructure.

He strongly criticised the higher airport charges levied by few airports in India. “The increase will add over US$400 million in operating costs for airlines providing connectivity to India through Delhi,” he said, adding that an increase of this magnitude will impact travel demand by five to seven per cent which is bad for airlines, for passengers, for Delhi International Airport Private Limited (DIAL), for the Delhi hub, for Delhi as a city and indeed for India and its economy as a whole.

Commenting on the government’s airport policy, he said that DIAL pays 46 per cent 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. He urged the government to initiate deliberations on utilising the fee to offset the increase in aeronautical charges and the cost for passengers.

He further implored the government to look into a higher taxation regime for the aviation industry. “India’s airlines are also taxed on domestic fuel that can add an additional 30 per cent to the fuel bill. On top of that is an excise duty of 8.2 per cent. As a result, fuel is about 45 per cent of total operating costs for Indian carriers, compared to a global average of 33 per cent,” he said.

Commenting on Air India and Kingfisher Airlines, Tyler opined that the long-term state-aid has not rehabilitated the business of Air India and in the meantime it is having a destructive impact on the market. “Air India’s current position is similar to the position of Japan Airlines (JAL) couple of years ago. After the restructuring procedures of 2010, JAL reported US$2.5 billion profit in 2011. Although there were controversies about the way JAL has achieved it, he said that Air India can learn lessons how committed plans and solid business principles can bring a complete turn around.

Commenting on India’s stand on European Union’s Emissions Trading Scheme (ETS), Tyler said, “India does not appear to be philosophically against the EU ETS. The objection India has is that it is an attempt to wield the EU’s territorial rights. A lot of countries are also of that opinion. That position is very reasonable.”

The session was also addressed by Naresh Goyal, Member, CII National Committee on Civil Aviation & Chairman, Jet Airways and Ankur Bhatia, Member CII National Committee on Civil Aviation & The Executive Director, The Bird Group. Goyal highlighted some of the cost challenges being faced by the sector, including sharp depreciation of rupee, high taxation and rising infrastructure cost. Bhatia emphasized that aviation is a global Industry which has grown on the back of global standards in various disciplines and Indian Aviation cannot be operating in isolation from global aviation.