India in top 3 by 2020
In KPMG’s recent report on Indian Civil Aviation, the problems of the industry have been discussed and workable solutions have been suggested. The report questions the connectivity of our national carrier.
The Indian aviation industry is struggling on several fronts. The current problems include sluggish economy, high airfares, high ATF prices, high airport charges, low traffic, slow progress on airport projects, aircraft maintenance repair overseas, hub traffic being lost to competing countries, connectivity to tier II and tier III cities being limited and miniscule tourist traffic compared to India’s potential.
“The situation requires urgent attention. Tourism and aviation are two sides of the same coin and aviation growth is imperative for tourism development,” says Amber Dubey, Partner and Head-Aviation, KPMG.
India has already lost traffic potential worth 130 million people per annum and this impact resulted in the lost potential of 320 additional aircraft, investment of $30 billion and employment of 50,000 people (direct) and 300,000 people (indirect).
“We can ill-afford this loss. Growth potential from tier II and tier III cities is high and these areas need to be tapped. The general perception is that Emirates, with its extensive reach, is India’s national carrier,” adds Dubey.
Last year, KPMG highlighted the need for various policy reforms, such as opening of bilateral agreement to all Indian carriers, direct import of ATF, FDI up to 49 per cent by global airlines and abolition of import duty on aircraft spares. “The government, prime minister’s office, ministry of civil aviation and industry leaders have worked together to overcome all these challenges within a year and provide the industry a push in the right direction,” emphasises Dubey.
Though the aviation sector has opened up to changes, it still has a long way to go. Some of the recommended suggestions that require serious efforts include implementation of hub strategy for India, adding ATF under a declared good, 10 years tax holiday for MRO, regulatory clarity for airport tariffs – especially for dual-airport cities and fiscal and monetary support for tier II and III airports.
Dubey underlines “Aviation is a team game – PMO, finance, home, tourism, external affairs, defense ministries, all need to work together for this sector to grow. Our vision is to see India in the top three by 2020.”