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"Indian aviation can grow only if government slashes taxes, warnsIATA"

Tuesday, June 13, 2017

Indian aviation can grow only if government slashes taxes, warns IATA
The Press Trust of India

CANCUN - If India wants its aviation sector to grow, it should lower the entire 
burden of taxes and charges on it, global airlines body IATA has said. 

"We have always said to the (Indian) government to please lower the taxes if 
you want aviation sector to develop and bring much more prosperity and much 
more additional taxes at the end of the day, than you will lose by a lower rate 
of tax on aviation," IATA Director General and CEO Alexandre de Juniac told PTI 

 In a wide-ranging interview on the sidelines of the recent World Air Transport 
Summit, he said, "In India, we have a problem of course. Airspace, fuel and 
other charges are too high. If they want to develop aviation, they should lower 
the taxes and the costs". 

 When told that the government has fixed the GST rate on air tickets at 5 and 
12 per cent for domestic and international travel, respectively, de Juniac said 
he was talking about the entire financial burden on the airline industry. 

The financial burden includes the total costs on aviation fuel and an array of 
charges on airports, navigation, landing and parking, he added. 

About his comments that privatisation of aviation infrastructure, including 
airports, has failed to deliver benefits to the industry in India, Australia 
and some other countries, the IATA chief said, "in India, among other 
countries, privatisation of airports has been partly a good thing, partly a bad 

"It's a good thing that there has been a significant improvement in 
infrastructure in major cities like Delhi and Mumbai. But privatisation has 
been bad because of the very, very high charges the airlines have to pay. 
(There is) an unbearable increase in airport charges," he said. 

Noting that the government also takes away 40-45 per cent of the revenue of the 
airports back to the Indian budget, de Juniac said, it is something that pushes 
the charges and the prices through the roof. 

"... so infrastructure improvement comes at an unreasonable cost for the 
airlines," he added. 

In India, four major airports -- at Delhi, Mumbai, Bengaluru and Hyderabad -- 
are run on public private partnerships. 

On the government's regional connectivity scheme (RCS) and the proposed 
privatisation of secondary airports under it, de Juniac said, "for the 
connectivity with secondary cities, of which the government has an ambitious 
plan, it is clear that the airports have to be modernised. And there, what we 
favour is a good mix of public and private financing". 

His comments are significant as he drew a distinction between privatisation of 
ownership and control and private financing for modernisation of Tier-II and 
Tier-III airports. 

"Privatisation is not a good solution -- first because it leads to increase in 
charges and secondly, we have not found yet the appropriate regulatory 
framework or a system to balance public interest with private interest. 

"But we maintain that Indian infrastructure must be able to cope with the 
increasing traffic," the IATA chief said. 

He also pointed to the issue of how many slots would be made available in major 
metro cities to flights coming in from Tier-II and Tier-III cities. "That's 
(slots) the biggest challenge right now in Mumbai for international airlines 
also," he added. 

Any decision on the second airport or the Navi Mumbai airport has to be made 
fast, de Juniac said, adding, "a decision made now to build the second airport 
would be effective only after 5-7 years from now". 

The only airport which has been built faster than that time period is the 
Istanbul airport, he observed. 

On secondary airports and privatisation, de Juniac said, "we are slightly less 
vocal on secondary airports because the difference is that the primary airports 
are big hubs, critical assets, the primary entry (points) to the country". 

"They are something so critical to the country (and) we think public interest 
cannot be away from them. We have that in Singapore, UK and France...If the 
government is not involved highly in these critical assets, it does not work," 
the IATA chief said. 

For the secondary airports, de Juniac said the issue is probably slightly less 
critical in terms of privatisation. 

"But it is still clear when you privatise you have to maintain the tariffs and 
charges at reasonable level because you have to repay the guy who has invested 
in the airport which has minimal capital requirement and minimal 
profitablitiy...But you have not yet found the appropriate regulatory 
framework", he said. 

The IATA chief parried questions on the proposals to privatise Air India. 

Observing that this was the second time such an announcement has been made, de 
Juniac said, "we don't have a position on that". 

"The government can do whatever they like with the airline, provided they do 
something which is competitive or competition-oriented. If there is no 
distortion in the market, its okay. Then do it," he said. 
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