Indian aviation sector in critical phase: IATA

Hyderabad : The situation in the Indian aviation sector is critical and there is an urgent need to address the problems, the head of an international carriers’ trade group said here Thursday.

Tony Tyler, director general and chief executive of International Air Transport Association (IATA), forecast that the aviation industry in India may not do well this year too as no major structural changes were made to offset the airlines’ losses in view of the increasing fuel prices.

Talking to reporters on the sidelines of India Aviation 2012 here, he said the government should reconsider the high User Development Fee (UDF) at airports in Delhi and Mumbai to stop further damage to local and international airlines connectivity and foreign tourist arrivals.

“AERA proposed 340 percentage of increase in the UDF at Delhi airport. If it materialises, Delhi will become the most expensive airport,” he said.

Earlier, addressing the conference he said the problems the Indian aviation sector was facing were severe and beyond the control of airlines and solving them will require a government-wide team effort.

He called for evolving a four-pillar strategy to rebuild competitiveness and assured support for developing such a policy.

“The situation in India today is critical and we must move forward urgently and through IATA, I can certainly pledge the resources of the industry to support the development of such a policy with the greatest amount of determination and speed,” he said.

He asserted that the agenda to rebuild competitiveness in Indian aviation rests on four pillars of taxes, infrastructure, costs and investment policies.

Tyler said the ministry of civil aviation can and has taken steps in the right direction. “But without the support of the ministries of tourism, finance, environment and petroleum and the Competition Commission, the major changes that are needed cannot take place,” he added.

Many committees and groups of government officials have looked at remedies in the past and another committee is not the answer, he said and suggested that a common vision expressed in the National Aviation Policy and strongly linked to an implementation plan could be a way forward.

While referring to foreign direct investment for Indian Airlines, he said foreign airlines could own up to 49 percent of an Indian domestic carrier if the aviation ministry proposed to lift restrictions.

Tyler said the ministry’s proposals to lift restrictions would allow strategic tie-ups with foreign airlines cemented by an equity stake.

Such equity partnerships have strengthened airlines such as Lufthansa-SWISS-Austrian-Brussels Airlines, Air France-KLM-Alitalia, LAN-TaM and British Airways-Iberia

While welcoming the government decision to allow foreign airlines to invest in Indian carriers, he said FDI was not a panacea.

“Without addressing the other three pillars – costs, taxes and infrastructure – it may only be a theoretical exercise because under current conditions the odds are stacked against any investor making a positive return on investment in Indian aviation sector and no one is likely to come forward unless they see themselves making a profit,” Tyler said.