Government levies choking airlines, says IATA chief Alexandre de Juniac

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New Delhi | Updated: September 5, 2018 5:43:59 AM

The IATA chief’s comments come on the heels of aviation consulting firm CAPA estimating the combined losses of domestic airlines in the current fiscal at around $1.9 billion (nearly Rs 14,000 crore).

Government levies choking airlines, says IATA chief Alexandre de Juniac

Civil aviation secretary RN Choubey said on Tuesday that the government was working on a relief package for airlines to try and bring down their operating costs though no specific measures were outlined and no deadline specified. He was responding to observations by Alexandre de Juniac, director-general and CEO of International Air Transport Association (IATA). Juniac said excessive levies and costs being borne by airlines, coupled with infrastructure constraints, were limiting growth.

Juniac pointed out that the steep rise in the prices of aviation turbine fuel together with the fall in the value of rupee were pressuring profits of airlines. He also pointed out that levying the goods and services tax on international tickets violates the principles of International Civil Aviation Organisation.

The IATA chief’s comments come on the heels of aviation consulting firm CAPA estimating the combined losses of domestic airlines in the current fiscal at around $1.9 billion (nearly Rs 14,000 crore).

A combination of stagnating yields and rising costs is hurting airlines’ bottomlines.

Responding to the concerns, minister of state for civil aviation Jayant Sinha also said that his ministry is looking at tax anomalies in ATF and has already made representations to the GST Council. “It is complicated considering the country’s federal structure,” Sinha added. Air India, Jet Airways, and Vistara are members of IATA which boasts 280 members.

“If we can comprehensively fix jet fuel and infrastructure issues, India will be primed to take a giant step forward in the world of aviation,” Juniac said. He added IATA had long made a case that applying GST to international tickets violates ICAO principles and India’s international obligations. He noted that the deviation from global standards may benefit the government in the short-term but weakens India’s competitiveness by raising the cost of connectivity.

At present, GST is levied at 5% and 12% on economy and business class air tickets, respectively. According to IATA, while fuel typically accounts for about 24.2% of an average airline’s costs, in India, it is much higher at around 34%. “All airlines are suffering from the rise in fuel prices. And India’s regulatory and tax framework around fuel hits airlines serving this market even harder,” the IATA chief said.

Juniac rued the fact there was no real competition for fuel suppliers at airports and hence little incentive to keep prices competitive. “The lack of competition in fuel and lack of true open-access to on-airport fuel infrastructure is strangling the lifeblood from the airlines. If you kill the goose that lays golden eggs, there are no more eggs,” Juniac said.

While Jet Airways quarterly loss during the April-June quarter was at `1,323 crore, low-cost carrier IndiGo reported its lowest quarterly profit — down 97% year-on-year at `27.8 crore — in three years during the quarter.

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