Thursday, September 25, 2008
Domestic airlines will have to improve efficiencies
India is expected to post the largest aviation sector losses (outside of the United States) this year at $1.5 billion on rising fuel bills and slowing traffic growth.
From 33% increase in 2007, traffic growth slowed to 7.5% in between January and June this year and has become negative subsequently.
Airlines look to downsize workforce to stay afloat
No wonder then that the International Air Transport Association (IATA), which represents 230 airlines or 93% of scheduled international air traffic, has prescribed a bitter medicine to cure the ills. Director General and CEO Giovanni Bisignani was blunt when he said on Wednesday that instead of continuing to focus on grabbing market share, Indian airlines need to improve efficiencies to even remain in business.
Airlines bet on softer oil prices
The next months are critical. The industry is sick. I had to suspend 25 airlines from our settlement systems because they went bust.
More India business stories
Many of these were because they were fighting to grow traffic instead of profit. This is not the time to grab market share. Action on external issues is also required to bring the industry back to health, he said.
Bisignani used some tough words against the government too, pointing out the absence of any action on making aviation turbine fuel (ATF) cheaper despite several representations by the industry.
His demand? The government should take steps to remove the excise duty and reduce sales tax to 4% on ATF, which accounts for as much as half the operating costs for some Indian airlines. It is a wake up call for the ministry of finance, he said.
The IATA chief also noted that at a time when domestic capacity growth is expected to all together stop by the end of the year to cope with mounting losses, infrastructure costs could rise further, causing concern. India does not measure up. There is no transparency in the cost base for either airport or air traffic control.
Our best estimate is that there is a 20% over collection for air traffic control. And charging 33% more for international flights to land than domestic can only mean cross subsidisation as the service is the same.
More India business stories
Lack of aviation infrastructure at Mumbai was specially noted by Bisignani, who pointed out that since it isn\'t possible to build an additional parallel runway and the greenfield site under consideration cannot be considered a long-term solution, Mumbai needs an airport that can adequately serve the financial capital of the world\'s second most populous nation.
Air India
Under license from www.3dsyndication.com
From 33% increase in 2007, traffic growth slowed to 7.5% in between January and June this year and has become negative subsequently.
Airlines look to downsize workforce to stay afloat
No wonder then that the International Air Transport Association (IATA), which represents 230 airlines or 93% of scheduled international air traffic, has prescribed a bitter medicine to cure the ills. Director General and CEO Giovanni Bisignani was blunt when he said on Wednesday that instead of continuing to focus on grabbing market share, Indian airlines need to improve efficiencies to even remain in business.
Airlines bet on softer oil prices
The next months are critical. The industry is sick. I had to suspend 25 airlines from our settlement systems because they went bust.
More India business stories
Many of these were because they were fighting to grow traffic instead of profit. This is not the time to grab market share. Action on external issues is also required to bring the industry back to health, he said.
Bisignani used some tough words against the government too, pointing out the absence of any action on making aviation turbine fuel (ATF) cheaper despite several representations by the industry.
His demand? The government should take steps to remove the excise duty and reduce sales tax to 4% on ATF, which accounts for as much as half the operating costs for some Indian airlines. It is a wake up call for the ministry of finance, he said.
The IATA chief also noted that at a time when domestic capacity growth is expected to all together stop by the end of the year to cope with mounting losses, infrastructure costs could rise further, causing concern. India does not measure up. There is no transparency in the cost base for either airport or air traffic control.
Our best estimate is that there is a 20% over collection for air traffic control. And charging 33% more for international flights to land than domestic can only mean cross subsidisation as the service is the same.
More India business stories
Lack of aviation infrastructure at Mumbai was specially noted by Bisignani, who pointed out that since it isn\'t possible to build an additional parallel runway and the greenfield site under consideration cannot be considered a long-term solution, Mumbai needs an airport that can adequately serve the financial capital of the world\'s second most populous nation.
Air India
Under license from www.3dsyndication.com
# posted by Donna Adams : 2:45 AM
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