Fly, the beloved country

New Year’s Day marked the 100th anniversary of the birth of commercial aviation. On January 1, 1914, the first paying passenger on a scheduled airline flight was transported across Tampa Bay in Florida, US. What followed from the event — the development of the global aviation industry — changed our world.

The pace of growth reflected the thirst for connectivity. Commercial aviation started with one route, one plane, one passenger and one pilot. This year we expect some 3.3 billion passengers to board aircraft. That is a task equivalent to moving the entire population of India three times. They will fly safely on a fleet that exceeds 23,000 aircraft which operate on some 40,000 routes.

It is no understatement to say that aviation literally makes the economy move. The 50 million tonnes of air cargo that is carried annually accounts for more than a third of the value of the total world trade — some $6.4 trillion. The aviation industry itself supports 57 million jobs and a $2.2 trillion in economic activity.

The combination of connecting people and supporting economic growth firmly positions aviation as a force for good. It gives people the freedom and independence to explore the world. The industry links economies, supports development, and is arguably the most effective vehicle for sharing cultures and ideas.

A growth market India is among the beneficiaries of aviation’s many benefits. In fact, its role in modern-day India is critical. Aviation, including aviation-related tourism, contributes 1.5 per cent of India’s GDP and supports about 8.8 million jobs.

India would be a very different place without the ability to ship high-value products to waiting markets, or the ability to link overseas Indians to family and friends at home. It makes possible the face-to-face meetings and experiences that lead to foreign direct investment, training and skills-building that play such an important role in India’s development. And aviation brings most of the tourists eager to explore Incredible India.

The value of marking the centennial of an industry is found more in looking to the future than reminiscing about the past or exalting the present. We haven’t even scratched the surface of the potential for Indian aviation.

Domestic and international passenger traffic combined, only about 100 million people in India travel by air annually. That means the average Indian travels about 0.1 times per year. In the US, the number is over two times. When Indians travel by air as much as Americans we would expect a market of over 2.5 billion people.

The 6.6 per cent annual compounded growth that we expect over the next five years ranks India among the fastest developing aviation markets. This growth potential is being realised with some exciting developments on the country’s aviation landscape.

In India today, new airlines are coming onto the scene. Existing airlines are growing and developing global partnerships. Non-Indian carriers are eager to expand their offers. Two new airlines are expected to commence operations soon.

Indian carriers are expanding their activities through partnerships. And many governments are interested in expanding economic ties through aviation links.

India Flying It is absolutely certain that the aviation industry in India will grow. But the question is wether that growth will be successful or not. Will it deliver the maximum economic benefit? Will India be an industry leader — as the size of its market would indicate — or will it muddle along? Positive answers to these important questions are not guaranteed.

Here, urgent action is needed in three areas — addressing the high-cost airport environment, reducing the unduly onerous tax and regulatory burden; and increasing infrastructure capacity. Only then can we confidently predict that growth will be successful.

At the moment, I don’t see these being addressed with the needed speed and effectiveness.

The airport serving Mumbai will reach its maximum capacity in 2017. We will run out of Band-Aid solutions. But there is no clear indication of when Navi-Mumbai will be able to provide capacity to enable connectivity that underpins successful financial capitals the world-over.

India’s airport costs are increasing. In the past two years, we’ve seen charges at Delhi increase by 346 per cent, Mumbai by 164 per cent, Kolkata by 385 per cent, and Chennai by 269 per cent. This is eroding the sector’s competitiveness at a time when it needs some serious bolstering.

Although there has been some relief on aviation turbine fuel the industry still faces domestic fuel taxes as high as 30 per cent on top of which an 8.2 per cent excise duty is charged.

There are, of course, no easy answers to these issues. But a great start to commemorating aviation’s first 100 years and preparing for the next century would be the development of a coordinated national policy approach to aviation.

That would give us the political will to push forward projects such as Navi-Mumbai, to ensure cost-effective infrastructure and to replace the myriad taxes and charges on fuel with a more reasonable approach.

On the latter, a 4 per cent standard state tax on air turbine fuel confined to domestic operations would provide an enormous boost to the industry and India’s economy. But it could only be achieve as part of a national policy for the industry.

My hope is that 2014 will be the year where we put these challenges behind us.

India needs to enter aviation’s second century on a solid footing for success.

(The author is Director General and CEO, International Air Transport Association.)

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