There's - Orient Aviation

COMMENTCaution needed in a time of expansionThere’s no denying the massive growth underway in India’s aviation industry. Nine domesticcarriers are operating when a few years agothere were three. In 1991 India had just 219commercial aircraft. Today there are nearly 700and another 450 are on order.Yet, even with this rapid expansion, only 2% of Indian’sone billion-plus population travel by air. Persuading the restto join them has become critical for airline operators becausethere aren’t enough passengers to fill their seats. That has ledcarriers to mount damaging ticket price wars. And more seatsare arriving by the month. Everyone is losing money.As the cover story in this first edition of Orient AviationIndia clearly shows, there is a wide belief that some playerswill go bankrupt, disappear or be merged with others. Manynewcomers, caught up in the dream of an air travel boom,have placed unrealistically large aircraft orders. They are alsobeing hampered by archaic government policies that make itall but impossible for airlines to achieve sustainable levels ofprofitability.The government fuel tax offers one example. Alreadyburdened by high fuel costs, airlines have to pay an average27% on top of that in tax, meaning fuel can take up to 60% oftheir total expenses.Now airlines may be asked to pay even more. A new taxis being mooted to fund the restructuring of the country’saviation regulatory body, the Directorate General of CivilAviation (DGCA), which is short of staff and struggling tocope with a growing industry. This is ridiculous.India must rethink its tax regime if it wants expansion ofits airline industry to proceed smoothly. It must give seriousconsideration to a significant reduction in fuel tax.But airlines themselves must also play a part by moderatingtheir fleet growth ambitions and reducing ticket discounting.The alternative is precisely what everyone is predicting: aburst bubble with resulting casualties.TOM BALLANTYNEChief Correspondent• Orient Aviation India is an occasional publicationdesigned to coincide with major aviation events in India.CONTENTS4 Growth continues, as the strugglefor profitability intensifiesOA INDIA10 Jet Airways challenges Air Indiaby looking at long-haul12 It’s double or nothing atAir Deccan16 Tax burden makes it slowgoing for GoAir18 Paramount sees profit inbusiness travel22 Carriers home in on freight growthPUBLISHED BYWILSON PRESS HK LTDGPO Box 11435 Hong KongTel: Editorial (852) 2865 1013Fax: Editorial (852) 2865 3966Chief ExecutiveBarry GrindrodE-mail orientav@netvigator.comMARCH 2007 ORIENT AVIATION INDIA 3