IATA: Policy changes needed to help distressed Indian airlines

To overcome its airline industry's serious financial difficulties, India needs a more coherent aviation policy that creates conditions under which carriers can be more successful, according to IATA DG and CEO Tony Tyler.

Speaking Thursday in Hyderabad at the India Aviation 2012 conference, Tyler mapped out India's civil aviation potential. "Let's do some simple math," he said. "If India’s 1.17 billion people traveled at the same frequency as do Americans, a market of 2.1 billion travelers would be created. But even if they only traveled one-third as much, India would have an air travel market of about 700 million—rivaling that of the US.

"There is no doubt that India is a market with big potential and that aviation could be a much more significant contributor to the Indian economy. But there are no guarantees that this will occur without well-coordinated policy measures."

He pointed to the "major hurdles" facing Indian carriers. "Air India—the national carrier—is being sustained on life support of state aid," Tyler said. "The difficulties at Kingfisher are well known . And the sector as a whole is not generating the sustainable profits that one would expect from such a large high-growth market."

The Indian government could improve the country's airlines' prospects through several initiatives, he told the conference. For starters, taxes on airlines are too high, he asserted. "All [aircraft] fuel [in India] is subject to an 8.24% excise duty," Tyler said. "Then domestic flights face state fuel taxes of up to 30%. The result is destroying the competitiveness of Indian airlines."

Second, he said, airport infrastructure needs to be modernized where necessary. "Where we see value and a clear return on investment, airlines are willing partners in developing infrastructure capabilities," he added. Third, airport charges should be lowered, he said. 

Finally, Tyler pushed for India to end its restriction on investment in Indian carriers by foreign airlines.But he warned that "allowing foreign airlines to invest in Indian aviation is not a panacea [because under the current regulatory environment] the odds are stacked against any investor making a positive return on investment in the Indian aviation sector."

Article Source : ATW Daily News