Eye on Indian aviation

By victoria@aviationnews-online.com September 5, 2018 14:53

Eye on Indian aviation

The International Air Transport Association (IATA) released a comprehensive report on India’s aviation market this week, which focuses on the challenges of realising the economic and social benefits of an Indian aviation industry that has tremendous potential for continued high-speed demand growth.

Indian carriers are struggling once more to capitalise on this immense potential for sustained passenger traffic, with Jet Airways and Air India, failing to cut losses in the face of intense competition. India’s carriers are suffering a “double-whammy” of steeply rising fuel costs and the decline in the value of the Indian Rupee. The rise in fuel costs is particularly acute for Indian carriers for which fuel makes-up 34% of operating costs—well above the global average of 24%, according to IATA.

During the same week as IATA released its report, the Indian government has indicated that it is working on a relief package for the airline industry that would include yet more capital for Air India, but the comments from Rajiv Nayan Choubey to local media are light in detail. One option to relive the pressure on Indian carriers would be to relax or reform taxes on fuel and goods and services tax on maintenance operations

The government is promising more airports and improved infrastructure but demand is growing quickly that will make it difficult for any construction to keep pace. The IATA report forecasts the number of passengers travelling to/from/or within India will treble from 158 million in 2017 to 520 million by 2037. By 2036 India’s population is expected to reach 1.6 billion and average incomes are expected to rise to almost $5,000 per capita (a five-fold increase on 2006). With that, the number of “middle class” households should reach 20% by 2036 (up from 2% in 2006).

Today, domestic load factors are high, hitting a record 90% in February 2018. The 98 million domestic passenger trips in 2017 equal 7.3% of India’s population, according to IATA figures. However, average domestic fares fell by more than 70% since 2005, with low cost carriers accounting for about 70% of domestic seats. In 2017 there were about 60 million international journeys to/from India, a quarter of those trips were made with LCCs.

IATA predicts domestic markets to continue to drive industry growth. Of the 359 million additional passengers expected to fly in 2036, 228 million will be on domestic routes and 131 million will be connecting internationally.

IATA claims that protectionist and other negative policy impacts globally could hold India’s growth back to 4.9% and the total market would be 400 million in 2037.

Over the last five years India has risen from 132 to 100 on the World Bank’s Ease of Doing Business survey, which IATA applauds and suggests that continued improvement in this area will be critical to sustainable growth of aviation.

“Meeting the significant growth potential of Indian aviation will also create challenges – for the airlines, its industry partners and policy-makers. For example, this will require the right type of infrastructure at the right time and in the right place. Equally, the broader business and policy environment should not place hurdles which inhibit growth and reduce the level of benefits that aviation can deliver to the nation. The industry, its supply chain partners and the government and policy-makers have a clear mandate to work in collaboration towards the common goal of ensuring that aviation’s economic and social benefits are fulfilled,” said Brian Pearce, IATA’s Chief Economist and the report’s author.

IATA has called on the government of India to maximize the potential contribution of aviation to India’s development by addressing infrastructure constraints that limit growth and government policies that impose excessive costs on aviation.

“While it is easy to find Indian passengers who want to fly, it’s very difficult for airlines to make money in this market. India’s social and economic development needs airlines to be able to profitably accommodate growing demand. We must address infrastructure constraints that limit growth and government policies that deviate from global standards and drive up the cost of connectivity,” said Alexandre de Juniac, IATA’s Director General and CEO.

IATA calls for the Indian government to develop a comprehensive and strategic masterplan for India’s airports, which would include removing all obstacles to successfully open Navi Mumbai as quickly as possible and modernising airport processes using technology in line with global standards.

IATA has encouraged the Indian government to support the broad implementation of IATA’s One ID initiative which uses biometric identification (similar to India’s Aadhar identity card) to save time by eliminating the need for repeated document checks in airports.

IATA also encouraged the government to look at ways to improve India’s competitiveness by aligning with global standards and reducing excessive government imposed costs.

“There are many priorities in fostering the economic and social development of India. Fundamental issues of eradicating poverty, ensuring quality education, providing health care and safe drinking water are massively important agenda items. Creating a better environment for aviation to do business can and will progress the nuts and bolts of India’s development day to day. Safe, secure and sustainable air links make our world a better place. That is why I call aviation the business of freedom. And the government and industry share a privileged responsibility to work together for its success,” said de Juniac.

By victoria@aviationnews-online.com September 5, 2018 14:53