Press Release No.:
Date: 23 September 2010
Next Steps for Indian Aviation - Developing a Common Vision
New Delhi - The International Air Transport Association (IATA) called for a more coordinated cross-ministry government approach to shoring-up the gains made in India’s aviation industry.
“Under the leadership of Minister Praful Patel, international flight frequencies to India have tripled to nearly 2,300 per week. India is more connected than ever to our globalized world, bringing enormous economic benefits. This has challenged all those involved in India’s aviation industry to improve competitiveness. In recent years, there have been some great improvements. But there is still much more to be done. It’s time for a comprehensive approach with a common vision by all involved,” said Giovanni Bisignani, IATA’s Director General and CEO. Bisignani made his remarks in an industry dialogue hosted by the Confederation of Indian Industry in New Delhi.
Bisignani notes the tremendous potential for Indian aviation which currently a market of 42 million annual passengers domestically and a further 34 million internationally. “If Indians flew as much as Americans, it would be a market of over 4 billion passengers. With the spending power of Indians set to triple over the next two years, the potential for growth is incredible,” said Bisignani.
On the back of IATA’s upgraded global forecast for a profit of $8.9 billion in 2010, IATA noted that while some of India’s carriers are now reporting profits, the Indian sector as a whole is still expected to post a loss of $400 million. Moreover, it is carrying a debt burden of $13 billion. “In a market as rich in potential as India, the precarious financial situation indicates that structural weaknesses must be dealt with,” said Bisignani.
Bisignani highlighted key areas requiring special attention:
Safety: “India’s rapid growth must be accompanied with a strong focus on safety. Establishing the Civil Aviation Safety Advisory Council (CASAC) an important step forward. With IATA being a Council member, I strongly encourage CASAC to recommend that the IATA Operational Safety Audit (IOSA) is mandated for all India’s carriers. IOSA has helped IATA’s members achieve a safety record 2.5 times better than the global average. Taking advantage of this global standard will add a new dimension to India’s safety oversight.
Infrastructure: “Developments in Delhi are impressive. For the first time India has a hub that could rival Singapore or Dubai, with plans to accommodate 100 million passengers by 2030. But I have concerns over Mumbai. By 2016, stop-gap measures may take capacity up to 40 million. But where is Mumbai’s 100 million passenger plan? We must find a solution that is environmentally responsible. The clock is ticking and a conclusion is urgently needed. Mumbai is a great city. However history tells us that no city can remain great without effective transport links. It is time for all parties to work together to agree on a site and get on with it,” said Bisignani.
Liberalization: “In stark contrast to Minister Patel’s pragmatic liberalization is the old world approach to foreign direct investment (FDI) in aviation by the Ministry of Commerce. India allows 100% FDI in transit systems, ports, harbors, hotels, ocean transport and road systems. But airline FDI is restricted to 49%. Moreover, no foreign airline can invest in an Indian airline. The inconsistency is difficult to understand. Does it make sense that a non-Indian airline can own 100% of a green field airport project, but cannot invest a single Rupee in an Indian airline? The success of India’s airlines should not be compromised by an archaic investment policy that isolates them from global trends,” said Bisignani noting recent trends of consolidation, multi-hub and multi-brand strategies.
Policy Coordination: To build competitiveness, it is critical that the costs of operating in India is reduced. AERA—the airports regulator—has set a positive precedent by upholding ICAO principles and disallowing automatic cost increases for the airports in Delhi and Mumbai. But the Ministry of Finance has added $236 million to the cost of operating in India with an extension of India’s 10.3% service tax from international premium tickets to economy and domestic travel as well, in contravention of the International Civil Aviation Organization (ICAO) rules. “It is an embarrassing situation for such a relevant country as India—which is a member of the ICAO Council—to be ignoring rules that it has helped to develop,” said Bisignani.
Security: Bisignani noted a similar disconnect on security. Global standards, approved through ICAO, exist for the transmission of advance passenger information to governments for security purposes. “India chose to ignore these standards and invented its own unique requirements and processes. Moreover, local customs offices in Bangalore and Mumbai have added further local complications. Each deviation from the global standard adds costs but does not improve security. The Indian government committed to develop a program based on global standards with a single portal for transmitting data. The deadline for that has passed and we are still waiting. And to add insult to injury, airlines are now being threatened with fines for data transmission errors resulting from the complexity of the system,” said Bisignani.
Environment: The air transport industry has committed to improve fuel efficiency by 1.5% per year to 2020, cap net emissions from 2020 with carbon-neutral growth and cut net emissions in half by 2050 compared to 2005. “UN Secretary General Ban Ki-moon commended the industry’s ambitious target as a role model. But we can only achieve our targets with a global framework agreed by governments under ICAO,” said Bisignani. Bisignani re-assured that a global framework for aviation’s emissions under ICAO was in India’s best interests. “The United Nations Framework Convention on Climate Change (UNFCCC) has confirmed that a global agreement on aviation at ICAO will not compromise India’s position on Common But Differentiated Responsibilities (CBDR) in non-aviation discussions. And the global solution on noise reached a decade ago under ICAO shows that the special needs of developing nations can be accommodated. I hope that India will demonstrate a responsible position at the ICAO Assembly which starts next week. This mean supporting a global framework in line with industry targets and opposing regional schemes like the European Emissions Trading Scheme.
“I am a great fan of India. To support the amazing developments that are happening under the leadership of Minister Patel, IATA continues to expand our India operations. Arriving at the new Delhi airport terminal, it was clear that this could be the decade when Indian aviation will reach its potential. But there are no guarantees for success without continued hard work, change and a common vision for success shared across government and with the industry. India has come a long way in addressing the challenges of growth. The foundations for success are half-laid and IATA will continue its support to help finish the job,” said Bisignani.
View Giovanni Bisignani's speech
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Notes for Editors:
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