The International Air Transport Association (IATA) has called for a comprehensive policy for aviation aligned with India’s government’s stated intention to make it easier to do business in India.
By 2029, the objective is to allow India to become the third largest aviation market in the world, deriving maximum social and economic benefits, and increasing the number of visitors to, from and within India to nearly 280 million annually.
In order to achieve a successful overhaul of India’s aviation market, a number of factors need to be addressed, according to Tony Tyler, IATA’s Director General and CEO.
Reducing the tax burden in India is something which needs to be tackled according to IATA. The application of Service Tax should be aligned with a principle that it does not apply to services rendered outside of India, including overflight charges, global distribution systems, extra baggage fees and international tickets.
"Already aviation and aviation-related tourism support 7 million Indian jobs and $23 billion of India’s GDP. The healthy growth of the sector has the potential to expand these benefits tremendously. But there are immense challenges which must be overcome—as seen in the sector’s financial performance,” said Mr Tyler.
State taxes on jet fuel can be as high as 30 percent in India, and Tony Tyler has urged the government to grant “declared good” status for jet fuel, which would limit taxation. "The decision to introduce competition in jet fuel supply at key airports needs to be followed up with open access to the pipelines that get fuel to the airport in order for efficiencies of a liberalized market to be realized," he said.
IATA also highlighted the importance of allowing the Airports Economic Regulatory Authority (AERA) to do its work independently, specifically in three areas. India must overcome legal challenges which prevent AERA’s recommendation for a 78 percent reduction in Delhi’s airport charges from being implemented.
Secondly, India needs to protect the independence of AERA and the principle of a ‘single till’ for airport charges. It also needs to carefully assess the proposed privatisations of Jaipur, Kolkata, Ahmedabad and Chennai to ensure that the ‘single till’ principle is maintained, and that the privatisation terms are appropriate to the level of development as the airports.
"Regulation is also holding back the development of the sector. Well-intentioned regulations, but which are inconsistent with global standards, make doing business in India very difficult for the airlines. India imposes rules and requirements that are not seen anywhere else," said Mr Tyler.
Despite the obvious limitations to Indian aviation, our analysis of OAG Schedules Analyser data shows that both domestic and international capacity has increased quite significantly in India over the past ten years. IndiGo offers the greatest amount of capacity both domestically and internationally, with almost 31.3 million domestic seats in 2014, and just over 33 million seats internationally.
Delhi is clearly the largest market both internationally and domestically, though it is closely followed by Mumbai. Domestic capacity in India increased 174.8 percent between 2005 and 2014, while international capacity increased 147.3 percent during the same period.
Of the ten top Indian airports by international capacity in 2014, Delhi's Indira Gandhi International Airport and Mumbai's Chhatrapati Shivaji International Airport provide more than half of the international capacity on offer from India. The largest destination markets from the country last year were Dubai, Singapore Changi, Abu Dhabi, London Heathrow, Bangkok Suvarnabhumi, Kuala Lumpur, Sharjah, Doha, Muscat and Colombo.