Global Crisis Hitting Indian Aviation Hard

“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. 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 chief executive officer of the International Air Transport Association.

Bisignani identified three priority areas – reducing costs, improving infrastructure, and adopting global standards – in his address to the Confederation of Indian Industry.

“India is among the most expensive places on the planet to buy aviation turbine fuel. In August, it was 58 per cent 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 per cent for domestic flights result in a cost structure that cannot support a competitive industry. Removing excise tax, implementing a standard four per cent state tax for domestic fuel and greater transparency in overall pricing, are urgently needed,” said Bisignani.

“Taxing overflight charges breaches India’s international obligations under the Chicago Convention. Taxing premium class tickets and airport charges is contrary to the International Civil Aviation Organisation’s 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 India’s airport and air traffic control costs. There is an estimated 20 per cent over-collection for air traffic control, while international operations are charged 33 per cent more than domestic flights to land at India’s airports. “India must not waste any more time in establishing an effective Airport Economic Regulatory Authority to achieve cost efficient infrastructure and bring India’s charges in line with ICAO charges policies,” said Bisignani.

“In a few years, Asia Pacific will be the largest single aviation market. India is a key driver of that growth. India’s enormous size makes it an important market.”

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