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In A Tailspin

If 2008 saw an unprecedented surge and downfall in the performance of various sectors in India, the next year is likely to see more turbulence. We asked experts to look into their sectors and put forth their wishlist – for the changes they foresee, and want, in 2009

The airline industry in India was poised for significant growth at the start of the 2008, riding on a phenomenal 33% ongoing growth rate. World reports stated that India?s civil aviation passenger growth was among the highest in the world! Yet, the numbers in absolute terms remain low domestically and when compared globally. The future seems even more bleak. Growth has virtually stagnated due to inefficient policies, exorbitant taxes and inadequate infrastructure.

It is evident that the airlines are battling with various strategies and value-added initiatives to try and find a way to keep the business of flying alive. The low cost carriers have very markedly been the real innovators, keeping a tight rein on costs all along. Given the current situation and our county?s demographics, there are a few imperatives that need to be prudently addressed before fares can reduce to affordable levels.

A considerable reduction of excessive taxes thus abetting a lowered cost of supply to begin with. The recent reduction in ATF prices is heartening, but as feared, it may have, however, been reversed partly by the depreciation of the rupee against the US dollar. However, it has helped significantly lower our operating costs. And, the ATF being declared good is a long standing announcement that will help the industry at large and having said that a review of the ATF pricing mechanism will also be welcomed.

Outsourcing has been a healthy topic of conversation across aviation circles. Operator friendly policies that allow the airlines to have common resources that provide for security, ground handling and engineering is an absolute need of the hour. It would be appropriate to remove the royalty fee for outsourcing and at the same time consider a revoking of the service tax elements involved. Whilst domestic passenger traffic is on the rise, infrastructure hurdles remain. The number of aircraft per airline per year could also be restricted ? allowing infrastructure to catch up.

Landing and navigation charges could also be substantially reduced and lease tax could be completely withheld. With the maturing of the Indian Aviation Industry, the government?s already embarked liberalisation plan needs to be extended more enthusiastically towards encouraging more foreign direct investment in the sector and allowing foreign airlines (the only long term investors) to invest in India.

The year has seen noteworthy initiatives and a review of the foreign direct investment policy will hearten and empower the Indian Industry to help achieve a near viability in the year ahead. Another voice commonly echoed across the industry is a call for the relaxation of the mandatory routes ? route dispersal guidelines to the extent that it may be reviewed or removed. The already bleeding industry will achieve economic benefits with this consideration.

It?s time to review the airports and government agencies to have a revenue share with airlines instead of fixed fee?s and taxes? We will continue our efforts to make the government realise that there is an urgent need to bring the cost of operations in the Indian aviation sector at par with international standards and the biggest facilitator is the reductions of taxes, reconsideration of policies and bolstering infrastructural needs as outlined earlier. As our working population grows to 950 million, the potential size of the customer base for the low cost airlines in India will multiply substantially from current levels. The LCCs envisage a positive outlook. Today, the growth mood may seem bleak, but the future has to be envisaged as bullish.

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First published on: 28-12-2008 at 23:50 IST
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