India's passenger carriers are suffering from a "double whammy" of a steep rise in fuel costs and a decline in the Indian rupee's value, global airlines association IATA said on Tuesday.
According to the International Air Transport Association (IATA), the rise in fuel costs was particularly acute for Indian carriers as it makes up 34 per cent of operating costs well above the global average of 24 per cent.
"While it is easy to find Indian passengers who want to fly, it's very difficult for airlines to make money in this market," said Alexandre de Juniac, IATA's Director General and CEO, at the International Aviation Summit being held in New Delhi.
"India's social and economic development needs airlines to be able to profitably accommodate growing demand. We must address infrastructure constraints that limit growth and government policies that deviate from global standards and drive up the cost of connectivity."
IATA's top official pointed out that India's regulatory and tax framework for fuel hits airlines serving this market even harder.
"To start there is no real competition for fuel suppliers at airports, so there is little commercial incentive to keep fuel prices competitive. Then the airport takes fuel throughput fees. And, adding insult to injury, GST is then applied to the throughput fee, the infrastructure fee and the into plane service fee," de Juniac said.
"Then, on domestic flights, fuel is subject to excise duties and state taxes of up to 30 per cent. We understand that governments need tax revenue. But the economy needs financially sustainable air connectivity. 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!"
In addition, IATA said that global standard approaches can play a role in guiding the government to reduce India's costly operating environment.
"We have long made our case that applying GST to international tickets violates ICAO principles and India's international obligations," de Juniac said.
"These deviation from global standards may have a short-term revenue benefit for the government. But it weakens India's competitiveness by raising the cost of connectivity. And, in its current form, airlines continue to face many compliance challenges. We need to resolve these issues in line with global standards and shoring-up India's competitiveness."
IATA's growth forecast for India indicates a trebling of passenger demand by 2037 when some 500 million people are expected to fly to, from or within India.
Addressing the gathering Minister of State for Civil Aviation Jayant Sinha said: "IATA has forecasted 500 million trips in India in the next 20 years, and has recommended the need to brace up and be prepared for this growth."
"I would like to reassure everyone that we are in fact preparing for a billion trips. The demand for aviation is not a worry; we anticipate a huge demand from cities across India."