Rising incomes, not LCCs, boosting air traffic in India: IATA

Geneva, Dec 18: The growth in air passenger traffic across India is primarily due to rising income levels of people, and not because of low-cost carriers (LCCs) as is popularly perceived, the International Air Transport Association (IATA) has said.

''Low-cost airlines have just taken away business from full-service carriers. The growth in passenger traffic is primarily due to rising income levels and wealth,'' said IATA's chief economist Brian Pearce.

No-frills carriers have put in additional seat capacity which has pulled down air fares across the board. Lower fares have a chance of stimulating the market. And that is what happening in India, said Mr Pearce.

''Some consolidation in the airline industry will cut seat capacity in the short to medium term, which is pushing yields (revenue per seat) down now,'' he told UNI in an interview at the IATA's executive office here.

In calendar year 2006, the number of domestic air passengers is likely to reach 64 million passengers while the number of international passengers will move up to 27 million.

At least five low-cost airlines have consistently taken the credit in recent years to have brought down fares and creating new market. Among them are Air Deccan (the pioneer), SpiceJet, GoAir, Indigo and Paramount which now command substantial market share.

The Sydney-based consultancy firm Centre for Asia Pacific Aviation (CAPA) has predicted that LCCs' market share in India will reach 70 per cent by 2010, making it one of the world's leading LCC markets in terms of total market penetration.

Mr Pearce also defended a move by many domestic airlines to impose a congestion charge of Rs 150 per ticket which was fiercely opposed by civil aviation minister Praful Patel. ''Because of delay in creating adequate infrastructure by the government, airlines are bearing huge costs in terms of air turbine fuel (ATF) being wasted,'' said Mr Pearce.

Several planes have to hover over Delhi, Mumbai and other cities to land and wait for long before take-off because of congestion at runways. No airport in the country has more than two runways. ''Any business has to levy a charge to reflect the cost. So airlines are just imposing a congestion charge and making it transparent to a passenger. The fare needs to reflect the full cost of providing a service.'' Mr Pearce also knocked off Mr Patel's argument that congestion is there only at Delhi and Mumbai airports, and that it is not fair on airlines' part to have congestion charge all over the country.

''Delay at one airport will have a knock on another. Fares have come down drastically in recent past. Imposing congestion charge by airlines is a way of putting pressure on the government to move fast on the infrastructure development.'' The IATA official also criticised the decision by several governments -- including India's -- to imposed a tax on air travelers for funding AIDS combating programmes.

''Connecting businesses with global markets is vital for making them grow and become more productive. Taxing air passengers is a crazy way of running an economy. These governments are putting a tax on something which has nothing to do with aviation.'' India is facing enormous challenge in terms of airlines to make money. Most profits are being generated on international long-haul routes. ''But it is the best market for players to come up with innovative products. There should be freedom for mergers to take place and expertise to succeed,'' said Mr Pearce.

It is going to be a challenge for India to build adequate infrastructure for accommodating all aircraft being placed on order, said Mr Pearce. ''But it should be possible with private sector being able to attract investments. The key thing is efficiencies to be able to give benefits to passengers.'' India and China are going to be the biggest domestic markets for air travel, the IATA says.

''Whenever there is liberalisation, we see a flood of new entrants and then consolidation takes place,'' said Mr Pearce. ''There could be some casualties but it's a healthy feature of an open market where you have entrepreneurs coming up with new ideas. Some work, some fail.''

UNI