A few wise men

Written by Corporate Bureau | Updated: Jan 22 2008, 22:40pm hrs
At a time when the aviation sector is poised for growth, issues like inadequate infrastructure, high operational costs and escalating fuel prices are major concerns. To discuss it all, an expert battery of panelists from the aviation sector not only discussed the issues that have plagued the sector but suggested long-term solutions to counter the problems.

In his opening remarks, Ashok Chawla, secretary, ministry of civil aviation said, Passenger traffic is growing exponentially and the inadequate infrastructure and insufficient human resources in terms of cabin crew engineers and pilots need immediate attention.

However, indicating that the FDI limits in the passenger segment will not be raised from the current 49%, Chawla added that the industry needed to mature before the FDI cap is relaxed further.

The industry was progressing but with difficulty, expressed V Thulasidas, CMD, Air India. He said the single largest challenge for the airline was to manage their operating costs which majorly includes high aviation turbine fuel prices. Other issues like flight delays shall be done away with since Air India is inducting new aircraft in its fleet.

Saroj Datta, executive director, Jet Airways, continued that whether it be a government owned or privately owned airline, both were affected by the rising fuel prices. Deliberating on the uneven tax structure on importing ATF, Datta said, The entire tax structure pertaining to the import of ATF is not structured. Different states pay different taxes. The government has to look at those duties in a more relevant manner.

Agreeing with Datta, Kapil Kaul, CEO, Indian subcontinent and the Middle East (CAPA)Centre for Asia Pacific Aviation added that airline profitability was central to the business and the industry needed a special treatment from the government, He also said the country needed a structured policy for the development of greenfield airports apart from the other related infrastructure.

Replying to the issue of un-structured taxation policy, Chawla said that the ministry of civil aviation had been making persistent pleas to the finance ministry that the aviation fuel be announced as a declared good, so that the taxes were reduced and were uniform in all the states. Therefore on the suggestion of the finance ministry we are taking up the issue through the empowered group of state finance ministers, said Chawla.

Pointing out that outsourcing of technical staff in the airlines could help the airlines, Jeh Wadia, managing director, GoAir said once outsourcing of engineering or security or ground handling was allowed, the costs could be curtailed.

Rashesh Shah, MD and CEO, Edelweiss felt that the industry was still fairly uncapitalised if one extrapolated for the next couple of years. Government rules and regulations on foreign ownership and other issues are prevalent, but I think capitalisation is a key issue. Capitalisation will lead to valuation; the market does believe that there will be 3 or 4 key scale players.

On the other hand, Kapil Arora, partner, Ernst & Young, said capitalisation would not be an issue for companies with a strong fleet and efficient asset management in place.