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Tough measures needed to make AI survive, thrive: IATA

Last Updated: Wednesday, July 25, 2012 - 19:35

New Delhi: Tough measures need to be taken to make Air India "survive and thrive", global airlines body IATA said on Wednesday, asking the government to take a cue from the merger of two state-owned Japanese carriers which slashed jobs and operations to come out of bankruptcy.

IATA chief Tony Tyler, who raised the issue at a CII conference on Indian aviation, said the entire sector was in a "multi-faceted crisis" which could be resolved by coordinated public policies.

"To do that, we need an 'India Inc.' approach that addresses the crippling issues of high costs, exorbitant taxes and insufficient infrastructure," the Director General and CEO of the International Air Transport Association said here.

Drawing a parallel between Air India merger and Japan Airlines (JAL) after its 2002 merger with Japan Air System, he said both of them faced global financial crisis, recession and fuel price hike soon after their merger.

Hit by these problems, JAL filed for bankruptcy in 2010. The Japanese government then launched a USD three billion restructuring plan and took "difficult decisions" to turn the merged airline around.

"The cuts were deep -- some 50 routes and 16,000 jobs. That's just short of a third of the workforce.

With this bitter medicine, and other measures, JAL emerged from bankruptcy. After reporting a USD 2.5 billion profit in 2011, it plans to re-list its shares this autumn," Tyler said in a clear indication that the government should take tough steps to bring Air India out of the crisis.

Later when asked whether he wanted Air India to be privatised, he said he did not suggest privatisation. The government should take steps to stabilise its operations first so that the airline could survive and thrive, he said.

Noting that the Indian aviation sector was in "a multi- faceted crisis" crippled by high costs and exorbitant taxes, Tyler said the major carriers, including state-owned Air India, lost around USD two billion in the last financial year and were carrying debts of some USD 20 billion.

"India's aviation is in a multi-faceted crisis. Before the aviation sector can deliver greater benefits to the Indian economy, this crisis must be resolved," the IATA chief said, adding that the Indian carriers had lost USD 3.5 billion over the previous three years.

Observing that of India's six main airlines, only IndiGo was making money, he said, "The financial situation of Kingfisher is dire and Air India is on government life support.

"Urgent and coordinated actions are needed to resolve Air India's problems and its stability is vital for the Indian aviation market to return to normal commercial principles as quickly as possible," Tyler said.

On high costs and rising taxes, he said the airport regulator AERA had recently approved a 346 percent hike in charges at Delhi airport. "The increase will add over USD 400 million in operating costs for airlines providing connectivity through Delhi."

Welcoming government's intent to allow foreign carriers invest in Indian airlines, Tyler, however, said, "If critical problems are not comprehensively addressed, (investors) will not be lining up to put their cash in Indian airlines ... because, under current circumstances, investors can't see how they will ever enjoy a return."

Focussing on the recent 346 percent hike in airport charges in Delhi, Tyler said this would "add over USD 400 million in operating costs for airlines providing connectivity" through the national capital.

"An impact of this magnitude will impact travel demand by 5-7 percent. That's bad for airlines, for passengers, for Delhi International Airport Private Limited (DIAL), for the Delhi hub, for Delhi as a city and indeed for India as a whole."

Asserting that "nobody wants DIAL to lose money" and that they have "invested handsomely to build a world-class terminal", he recommended that the 46 percent share being given by DIAL to Airports Authority of India (AAI) could be used to "soften the burden on the airlines".

While a hub would not be possible unless DIAL profits, "we have a problem of equal magnitude if airlines cannot afford to operate profitably from the airport," he said.

The IATA chief stressed "coordinated action" by Ministries of Civil Aviation as well as those of Finance, Tourism, Commerce, Environment and others to support the Indian aviation sector.

"It's time for a grand plan to build India's aviation future and thereby strengthen the Indian economy. .... The world is focused on Indian aviation ?- from manufacturers, tourism boards, airlines, global businesses to individual travellers, shippers and businessmen," Tyler added.


First Published: Wednesday, July 25, 2012 - 19:03
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