Last updated: 05:00 PM ET, Tue July 14 2015

India Poised To Become World's Third Biggest Aviation Market

Airlines & Airports | Rich Thomaselli | July 14, 2015

India Poised To Become World's Third Biggest Aviation Market

International Air Transport Association (IATA) Director General and CEO Tony Tyler has called for the development of a comprehensive policy for aviation aligned with the Indian Government’s stated intention to make it easier to do business in India.

Speaking at Aviation Day India, organized by IATA together with India’s Ministry of Civil Aviation (MoCA) and the Confederation of Indian Industry, Tyler said the country is poised to become the world’s third-largest aviation market by 2029, when 280 million people are expected to fly to, from and within India.

“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,” Tyler said. “But there are immense challenges which must be overcome—as seen in the sector’s financial performance. While demand growth is robust and some airlines are generating profit, sector-wide losses for India are still expected to exceed $1 billion this year.”

In his address Tyler highlighted three priority areas where work is needed to reduce costs in India:

• Reducing the Tax Burden: The application of service tax should be aligned with a principle that it does not apply to services rendered outside of India including those for overflight charges, global distribution systems, extra baggage fees and international tickets.

• Competitive Fuel Pricing: State taxes on jet fuel can be as high as 30 percent. Tyler urged the government to grant “declared goods” 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,” said Tyler.

• Allowing AERA to do its work: Tyler highlighted the importance of allowing the Airports Economic Regulatory Authority (AERA) to do its work independently.

“There is a great opportunity for the government’s ease of business agenda in aviation,” he said. “Aviation is already a largely standardized industry with many global references to guide us. And by working with MoCA based on airline input, we could develop and deliver an effective action plan for aviation in India. I would like to be ambitious about what we can achieve. Aviation should be the model sector demonstrating India’s efforts to make it easier to do business here.”

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