Infrastructure constraints which limit growth and government policies that impose excessive costs are being highlighted as key issues for the future of the burgeoning Indian aviation sector.
Growth forecasts indicate a trebling of passenger demand by 2037 when some 500 million people are expected to fly to, from or within India.
Aviation currently supports 7.5 million Indian jobs and 30 billion rupees of GDP or 1.5% of the country’s economy.
But the financial struggles of India’s airline industry is putting the stable development of connectivity at risk.
India’s carriers are suffering a “double-whammy” of steeply rising fuel costs and the decline in the value of the Indian rupee, Iata warned.
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%.
The head of Iata called on the Indian government to maximize the potential contribution of aviation to the nation’s development by addressing infrastructure and cost issues.
Director general and CEO Alexandre de Juniac said: “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.”
He was speaking at the International Aviation Summit in Delhi, marking the approaching milestone of 50-straight months of double digit domestic growth for Indian aviation.
“It is clear that India has the capacity to develop effective infrastructure. But the job is not done. Passenger numbers will grow. And infrastructure must not be a bottleneck in fulfilling the needs of travellers and the economy,” said de Juniac.
“The infrastructure issue is critical for India’s future. Band-aid solutions will not do the job.”
Iata also has concerns over government proposals for concession contracts at newly developed greenfield airports.
“We believe that it makes no sense to fix a per passenger yield at the outset of a concession contract that is set to run for four decades.” said de Juniac.
“Flexible parameters should be set that are regularly reviewed by a regulator. And we know from bitter experiences in Brazil, Australia and elsewhere that selecting the company that simply proposes the highest concession fee does not yield good long-term results.”
The government must also look at ways to improve India’s competitiveness by aligning with global standards and reducing excessive state-imposed costs, including a cut in jet fuel duties.
“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, said de Juniac.
“Creating a better environment for aviation to do business can and will progress the nuts and bolts of India’s development day to day.”