No.

: 31 Date: 18 October 2005

Five Challenges For A Successful Indian Air Transport Sector

(New Delhi) The International Air Transport Association (IATA) today identified five challenges for the successful development of air transport in India (1) enhancing safety, (2) urgent infrastructure improvement, (3) reasonable taxation, (4) commercial freedom and (5) Simplifying the Business through effective use of technology.

"The Indian air transport sector is among the most vibrant and fastest growing in the world, but it could be a much greater catalyst for economic growth if critical bottlenecks in the system are removed. The most urgent is infrastructure, particularly Mumbai airport. Government policy is moving in the right direction. Now we need to see some results urgently to keep pace with rapid growth. We need results fast, or a great start could turn into a disaster," said IATA Director General and CEO, Giovanni Bisignani set forth the challenges at a meeting hosted by the Confederation of Indian Industry (CII) in New Delhi.

IATA growth forecasts for India indicate average annual growth of 8.4% in international traffic between 2004 and 2009. Combining domestic growth increases this to an average annual growth rate of 12% to 2009 against GDP growth of 7.2%. "Normally we would expect air transport to grow at twice the rate of GDP, so we should be expecting growth in the 15% range," said Bisignani.

The Challenges Enhancing Safety

"Safety is the number one priority for aviation. India's record on safety is good, but constant attention and efforts are needed, especially at a time of rapid expansion," said Bisignani. IATA's Operational Safety Audit programme is the first international standard benchmark for airline safety management. Air India is among the 67 carriers currently on the publicly available IOSA registry ( www.iata.org/iosa) and Jet Airways will undertake an audit this month. By the end of 2005, 140 carriers are expected to be in the audit process. As India's air transport sector grows, safety must be the number one priority. "I hope to see all of India's carriers committed to IOSA by our Annual General Meeting in June 2006. And I encourage the Government of India to make IOSA a part of its safety oversight program," said Bisignani.

Cost Efficient Improvement Of Infrastructure

"Airport and airspace capacity must be expanded to fully gain the benefits of a vibrant airline sector. Without massive change, infrastructure will not be able to handle growth. Airports in Delhi, Mumbai, Chennai, Kolkatta and Bangalore are not adequate. Among them, Mumbai is the worst with pool service levels and insufficient capacity. A commercial centre needs an efficient airport. Delays due to bottlenecks in the air traffic control system are common. They are costly to airlines and inconvenient to passengers. And when all the aircraft orders made during the Paris Air Show are delivered, we risk chaos if we do not move quickly now," said Bisignani.

Bisignani also commented on private participation in airports. "IATA does not care who owns the airports. Our only condition is that they are safe, cost-efficient and provide adequate capacity. Any private participation must benefit all stakeholders, result in greater efficiency, lower costs and better service levels. And it must come with effective economic regulation to ensure the commercial discipline of airports which are natural monopolies," said Bisignani.

Reasonable Taxation

Air transport pays for its own infrastructurea total of US$42 billion each year. In respect of this, international air transport is exempt from taxation. "We are happy the Indian government abolished the fuel uplift levy in 2002. But we are disappointed that, to date, the US$36 million collected by this levy still has not been returned to the airlines. We urge the timely resolution of this issue," said Bisignani.

"Recently India imposed a 10.2% service tax fee on landing, airport and air navigation fees. We are challenging the legality of this. And we believe that this reduces the competitiveness of India's air transport sector. India needs a common-sense approach to taxation. That means recognising that we fully fund our own infrastructure, and ensuring that any taxes or charges collected are transparent and re-invested in the sector," said Bisignani.

Freedom To Do Business

"Governments must let airlines run their businesses like real businesses. We need basic commercial freedoms to serve markets where they exist, to be able to access global capital markets, and to merge and consolidate where it makes commercial sense. Liberalisation is not something to be feared, but to be anticipated. We are not looking for the world to change overnight, but that is not an excuse not to get started on progressive liberalisation. SAARC is moving in this direction by lifting some capacity restrictions. I hope the implementation of the South Asia Free Trade Agreement next year will be a catalyst for liberalisation. The open bilateral between India and Sri Lanka is a model of how liberalisation results in economic growth, with increased number of services per week and the creation of employment opportunities between the two countries. I hope that India will continue to take the lead in SAARC by promoting regional liberalisation," said Bisignani.

Simplifying The Business

IATA launched Simplifying the Business in 2004 to improve passenger convenience and cut costs by using technology more effectively. The programme has 5 core projects aimed at achieving US$6.5 billion in savings. These are: 100% e-ticketing by the end of 2007, taking the paper out of freight processing, radio frequency identification for baggage management, bar coded boarding passes and common use of self service kiosks for check-in.

"E-ticketing is the most pressing because it has a deadline of the end of 2007. At that time, we will stop printing the 340 million paper tickets that are used today. Our target is 40% global e-ticketing penetration by the end of 2005. Globally we are past 33%. Asia Pacific is near that at 30%. But India is far behind at just 5.4%. It is extremely disappointing that a country as advanced in software development as India can be so far behind. India must be a leader in this region, not the last to get on board," said Bisignani.

Challenges

"The challenges that face India are enormous. Urgent decisions on infrastructure, liberalisation, safety oversight and taxation are critical. And we must move quickly. IATA has strengthened its presence in India to help both its members and the government at this time of great potential. The stakes are high, but the rewards for our efforts will be enormous. Governments, airlines and IATA working together will make a very positive contribution to this wonderful country," said Bisignani.