The global crisis resulting from high oil prices and declining traffic is hitting India hard. Growth has slowed from 33% in 2007 to 7.5% for the first six months of this year.
And the last two months have been negative. Indian carriers could post US$ 1.5 billion in 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, said Giovanni Bisignani, Director General and CEO of the International Air Transport Association (IATA). Bisignani identified three priority areas reducing costs, improving infrastructure, and adopting global standards in his address to the Confederation of Indian Industry (CII). Costs: India is among the most expensive places on the planet to buy aviation turbine fuel (ATF). In August, it was 58% more expensive to buy fuel in Mumbai (for domestic flights) than in Singapore (for international). Excise duties, throughput fees charged by airport operators and state taxes of up to 30% for domestic flights result in a cost structure that cannot support a competitive industry. Removing excise tax, implementing a standard 4% state tax for domestic fuel and greater transparency in overall pricing are urgently needed, said Bisignani. Bisignani took note of Indias Service Tax on premium class tickets, overflight, landing and airport charges. Taxing overflight charges breaches Indias international obligations under the Chicago Convention. Taxing premium class tickets and airport charges is contrary to the International Civil Aviation Organizations (ICAO) resolution 8632 calling for reductions in taxes. These are embarrassments for a country that is a long-standing member on the ICAO Council. Bisignani also questioned the lack of transparency in Indias airport and air traffic control costs. There is an estimated 20% over-collection for air traffic control, while international operations are charged 33% more than domestic flights to land at Indias airports. India must not waste any more time in establishing an effective Airport Economic Regulatory Authority (AERA) to achieve cost efficient infrastructure and bring Indias charges in line with ICAO charges policies, said Bisignani. Infrastructure: Infrastructure investments are urgently needed. While Delhi is moving towards the capability of handling 100 million passengers, the situation at Mumbai remains critical. There is no possibility to build an additional parallel runway. The Greenfield site under consideration with a phase one capacity of 10 million passengers a year will provide some relief, but it is not a serious long-term solution. Mumbai needs an airport that can adequately serve the financial capital of the worlds second most populous nation. That means thinking much, much bigger. We must use the breathing space of the current downturn to plan for capacity in the 100 million passenger range for Mumbai, like airports in Delhi, Seoul, Hong Kong, Dubai and other important cities, said Bisignani. Standards: Global standards have played a crucial role in the development of air transport and should be at the heart of Indias aviation policy and commercial development. But India has taken a major diversion in security. The non-standard data transmission requirements for Advance Passenger Information (API) is an added cost burden that provides no additional benefit. This is a serious flaw for Indias API at a time when increased cooperation is needed, said Bisignani. Bisignani 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. Indias enormous size makes it an important market. It also gives it a responsibility to take a leadership role on policy issues. India must be a strong voice for a global solution on the environment, as envisioned by Kyoto. And it must look beyond its borders to be a strong voice for global change and greater commercial freedoms, said Bisignani. I am an India optimist, but my biggest concern is speed. Aviation is a fast-changing industry that is fueling much of the Indian economic success story. But the crisis is highlighting that Indias decision making is too slow. India is not just a great market. It must also be a great leader. Minister Patel has done a great job in liberalising the industry and setting the wheels in motion for the rapid development of aviation in India. The benefits are clear: connecting business to markets, expanding tourism and creating jobs. Now it is the responsibility of entire government to follow up by addressing the issues of todays crisis with quick decisions based on global standards and build a solid platform for future expansion, said Bisignani.