Set airline industry free by slashing taxes: IATA to India
Global airlines body IATA Wednesday asked Indian government to set the country's aviation industry free by expeditiously reducing taxes, especially those on jet fuel, instead of "micro-managing" the cash-strapped sector.
"The service tax on tickets, the high jet fuel prices due to taxation which account for 45 percent of the Indian aviation industry's cost in comparison with 30 percent for airlines in other parts, should be reduced or eliminated," IATA Director General and CEO Tony Tyler said here.
"Indian government should focus on safety, security and commercial freedom of the industry and not indulge in micro-management of the industry through (checks) on ticket pricing," he told the global briefing of the International Air Transport Association (IATA) here.
"We urge the Indian government to set the aviation industry free (from policy interventions like checking airfares). Concentrate on building infrastructure and the air navigation system. There is a lot the Indian government can do," he said, adding that the state taxes on jet fuel were having "a significant drag on the Indian carriers".
In India, the aviation industry contributes five percent of GDP, around Rs 291 crore in tax contributions, provides four million jobs and another seven million jobs through tourism and related activities, he said.
"We hope these numbers will have a good impact on government policies," Tyler said in reply to questions. "We have good relations with the Indian authorities and are seeking o persuade them of the benefits that can be derived from the civil aviation industry."
Maintaining that the Eurozone crisis was bound to hit the markets in Asia and other parts of the world soon, the IATA chief warned of deep losses for the global airline industry next year if the European economic situation continued to be grim.
In the context of high taxes on the aviation industry, Tyler said "cash-strapped governments implementing austerity measures are seeing aviation as a soft target for new or increased taxation..."
Understanding that aviation's connectivity is the lifeblood of the global economy should lead politicians to make it cost efficient as possible in order to reap the economic benefits that it facilitates."
Giving an example of the Netherlands, Tyler said the Dutch government which had raised Euro 300 million though passenger departure tax, repealed the tax when they found that "it cost the economy Euro 1.2 billion in lost economic activity. Other governments should take note".
Regarding capacity building and infrastructure, the IATA chief said some governments saw privatisation as a solution, but "we are agnostic on whether a facility is government owned or in private hands. What is important is the regulatory structure, it must follow the International Civil Aviation Organisation principles especially transparency and consultation with users".
IATA's Chief Economist Brian Pearce said the Asian region was the weakest in air freight markets this year as the Asian economies were witnessing a fall in demand from developed economies for goods manufactured in Asia.
Asia-Pacific airlines have seen a sharp fall in profits because of the importance of cargo in the region, he said.
Pearce said the IATA forecast for 2012 was that the high jet fuel prices and a weakening economy would lead to lower airline profits next year, "We forecast a fall in net post tax profits from USD 6.9 billion in 2011 to USD 3.5 billion in 2012".