IATA DG urges India to reduce costs, improve infrastructure and adopt global standards

Business Desk
"The global crisis resulting from high oil prices and declining traffic is hitting India hard. Growth has slowed from 33 per cent in 2007 to 7.5 per cent for the first six months of this year," said Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA).

He was speaking at an interactive session organized by the Confederation of Indian Industry (CII) in New Delhi today.

"Indian carriers posted $1.5 billion losses in 2008, the largest outside the US. Urgent action is needed to help Indian carriers weather the perfect storm of high costs and falling demand," he said. Reducing costs, improving infrastructure and adopting global standards are three priority areas, he said, to battle the downturn the Indian aviation industry is experiencing.

Mr Bisignani came down heavily on India's taxation structure applicable to the aviation industry. "India is among the most expensive places on the planet to buy aviation turbine fuel (ATF). Excise duties, throughput fees charged by airport operators and state taxes of up to 30 per cent for domestic flights result in a cost structure that cannot support a competitive industry," he said adding, "Removing excise tax, implementing a standard 4 per cent state tax for domestic fuel and greater transparency in overall pricing are needed."

Mr Bisignani cited India's Service Tax on premium class tickets, overflight, landing and airport charges to buttress his point. He expressed concern at the taxing of overflight charges and premium class tickets and said reductions in taxes will make the Indian industry more competitive.

To make the infrastructure more cost-efficient, the IATA chief called for establishing an effective Airport Economic Regulatory Authority (AERA) soon. This, he said, will "bring India's charges in line with ICAO charges policies."

On the issue of infrastructure in India, Mr Bisignani said, "Infrastructure investments are urgently needed." He said that while Delhi is moving towards the capability of handling 100 million passengers, the situation at Mumbai remains critical. "Mumbai needs an airport that can adequately serve the financial capital of the world's second most populous nation. That means thinking bigger," he said.

On the issue of security standards, Mr Bisignani said the non-standard data transmission requirement for Advance Passenger Information (API) is an added cost burden that provides no additional benefit in terms of security.

He also called on India to take a leadership role in shaping aviation policies, including environment and commercial freedoms. "In a few years, Asia Pacific will be the largest single aviation market. India is a key driver of that growth," he said. "India must be a strong voice for a global solution on environment, as envisioned in the Kyoto protocol, and it must look beyond its borders to be a strong voice for global change and greater commercial freedoms," he said.

Mr Bisignani said that aviation is a fast-changing industry and to keep pace, speed is essential. In today's crisis, he said, India needs to speed up its decision making process.

He lauded Civil Aviation Minister Praful Patel for doing a great job in liberalising the industry and setting the wheels in motion for rapid development of aviation in India. "Now it is the responsibility of the entire government to follow up by addressing the issues of today's crisis with quick decisions based on global standards and build a solid platform for future expansion," Mr Bisignani said.

Mr Bisignani was welcomed by Jet Airways' CEO Wolfgang Prock Schauer, who said that "today's crisis is far more severe that 9/11 and we need to be careful to tackle it." He said that despite 4-5 per cent growth rate in the Indian aviation sector this year, "the industry has suffered $1.5 billion worth of losses." He expressed concern at this saying, "the crisis is a result of high fuel costs that means high operational costs, and unrealistic, low-cost pricing policies adopted by operaters themselves." He called for a realistic pricing regime to put the aviation industry on the path to recovery.

Mr Ankur Bhatia, Past Chairman, CII Delhi State Council, in his concluding remarks thanked Mr Bisignani for bringing clarity to the issue and hope that the government would take necessary action to alleviate the industry's concerns.