New Delhi: Projecting a loss of $1.5 billion (Rs6,870 crore) for Indian carriers this year, the chief of the International Air Transport Association, or Iata, asked the government on Wednesday to wake up to the crisis in aviation and warned that the dream of liberalization could turn into a “nightmare” for the sector unless urgent steps were not taken.
Iata director general and chief executive officer Giovanni Bisignani said Indian aviation was “bleeding” and it would post “the largest losses outside the US (of) potentially $1.5 billion this year”.
Describing the situation as “volatile,” he asked the government to take rapid steps to remove excise duty and sales tax on jet fuel, which accounts for half the operational cost for some airlines.
“It is a wake-up call for the ministry of finance,” Bisignani said, adding that at least 25 airlines across the globe had gone “bust” in the past seven months and indicated that such a situation could arise in India if effective steps were not taken fast.
Wake-up call: International Air Transport Association director general and CEO Giovanni Bisignani at an interactive session of the Confederation of Indian Industry in New Delhi on Wednesday. Vijay Kumar Joshi/PTI
At an interactive session organized by industry lobby group Confederation of Indian Industry, Bisignani welcomed the government setting up a high-level committee to study the problems of the industry but said he was “concerned about speed” in decision-making. “In India, the decision-making process is slow and the situation does not wait for the recommendations of a committee because aviation is a fast-growing sector,” he said. “A very wise decision taken too late does not make any sense.”
The Indian carriers had started taking “some tough medicines” and their capacity growth would “stop by the year-end, as orders for new aircraft had been deferred,” the Iata chief said.
Warning that the next few months would be critical, he said the aviation industry was sick. “This is not the time to grab market share. Action on external issues is also required to bring the industry back to health.”
Calling for the speedy establishment of an airports economic regulatory authority “with adequate teeth” to regulate airport charges and other issues, he said he hoped that the legislation to give effect to it “without dilution” would be passed this year.
“Then, we must not waste any time in setting up the authority as a real regulator with teeth, not like the phantom regulator we have in the UK,” Bisignani said.
You need someone who is truly independent, not a retired civil servant from the ministry of civil aviation, he said separately. “Put a respected economist, give him complete freedom to run it for five years and after this he cannot be re-appointed. The risk is there because in every part of the world this has failed,” Bisignani said.
The Iata chief pointed out that the growth in the sector had slowed from 33% in 2007 to only 7.5% in the first half of this year and “went negative in the last two months”.
On infrastructure costs, he said India “does not measure up and there is no transparency in the cost base for either airport or air traffic control.”
Mint’s Tarun Shukla contributed to this story.