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'FDI To Elude Aviation If High Costs Prevail'

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Foreign airlines would not pick up stake in cash-strapped Indian carriers till steps are taken to stem the high costs of aviation operations in India, IATA chief Tony Tyler has said.

"No, I don't think it (allowing foreign airlines to invest in Indian carriers) is a game changer but it is a good thing. But it will not solve the problems of Indian aviation.

It certainly is a step in the right direction but it is not the panacea that some believe it is," Tyler told PTI in an interview in Geneva.

"As long as high taxes prevail, high airport costs and congestion, and poorly developed air navigation (services) means more congestion, high cost of operations exist, you are not going to get a lot of people to invest in airlines," the Director General and CEO of the International Air Transport Association (IATA) said at his operational headquarters here.

He was replying to questions on Indian government's recent decision to liberalise FDI policy in aviation, allowing foreign carriers to pick up a maximum of 49 per cent equity in their Indian counterparts.

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Observing that there were restrictions on investing in airlines around the world which was "a problem for the industry", Tyler said "any move that we see in liberalising, is a good thing.

"But unless conditions in India are improved for the airlines, you are not going to see a flood of foreign carriers coming into the industry. Because foreign capital needs a return just as anywhere else."

The IATA chief also made it clear that merely investing fresh capital would not solve the problems of the industry.

"It has to be used in a way to improve the business in some way. It can be used to grow the business. If the business is loss-making then some of it needs to be used to restructure."

On the Airport Development Fees (ADF) imposed at Delhi and Mumbai airports which is to be withdrawn from January, Tyler said though the government has taken the right step in ordering withdrawal of ADF, IATA was concerned that the revenue shortfall on this count would have to be offset by raising charges for the airlines.

"We are very against this whole ADF. Of course, we do welcome the fact that the Civil Aviation Ministry is getting involved in this area and instructing Airports Authority of India not to seek ADF in Chennai and Kolkata and also to reduce ADF in Mumbai and Delhi.

"But we are concerned that it will go from one hand to the other. The revenue shortfall from one will be somehow offset by the other by increasing airline charges somewhere else. So we will have to make sure that does not happen."

Tyler said the high airport costs were impacting domestic air traffic which had declined in the recent past.

"The Indian airport costs, let us not kid ourselves, remain a big problem. .... Domestic traffic has been in decline recently. High airport costs have to have something to do with it," he said.

Though this was not the only reason for a declining air traffic, "if you put the cost of operating for the airlines it is going to reduce the amount of operations they are going to do. They are not going to be able to put fares in the market that will keep people flying," the IATA chief said.


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