Facing Headwinds

IATA chief Alexandre de Juniac hopes the Indian government will rationalise taxation on aviation to help the industry weather financial turbulence.

- Debabrata Das

THE INDIAN AVIATION INDUSTRY is facing multiple headwinds: rising fuel prices, a falling rupee, and the inability of domestic carriers to raise fares adequately. But there is a silver lining—50 months of consecutive double-digit air passenger growth. Alexandre de Juniac, director general and CEO of the International Air Transport Association (IATA), tells Fortune India in an interview that apart from clearing regulation bottlenecks and lowering tax, the government needs to quickly invest in airport infrastructure and set up more air traffic control towers to help improve the financial health of these airlines. Edited excerpts:

What do you make of the Indian aviation industry right now and the kind of trouble it faces?

The first point is that Indian aviation could have a very bright future with very strong growth in front of it. But it is operating under very tight financial constraints. No one is making money these days due to macroeconomic factors, including the depreciation in the rupee and the increase in fuel prices. The problems airlines are facing right now are also due to the additional costs that some governmental policies or measures are putting on their balance sheet and profit and loss account.

The second type of constraint is that supply is limited because investments haven’t been done on airports and traffic control. So these two have to be significantly and quickly improved. You also have a regulation that is sometimes too tight, and, of course, taxation is quite high. The airlines could be even more successful and stronger but they are operating under severe constraints.

Do you think the airlines could have done better when the conditions were more favourable, given the kind of passenger growth India has seen over the past few years?