India has the right vision and a well-timed strategy for the aviation sector, considering its strong economic growth and large population, according to the International Air Transport Association (IATA).
It is important to ensure that excessive taxes do not hinder the positive impact. Marie Owens Thomsen, the Chief Economist at IATA, expressed her opposition to any kind of duopoly in the airline industry and stressed the significance of healthy competition and resilient participants.
During a media interview at the IATA World Air Transport Summit in Istanbul, Thomsen commended India’s aviation strategy of expanding airports and aircraft. However, she cautioned against undermining the potential benefits through excessive taxes and burdensome regulations. She noted that India has not yet achieved the desired level of rapid growth.
Thomsen’s views on competition were in response to a question regarding the potential for a duopoly in the rapidly growing Indian airlines market. As domestic air travel continues to grow, the airline industry is encountering difficulties, including the suspension of operations by Go First and SpiceJet grappling with multiple issues. Meanwhile, IndiGo and Air India group are expanding their presence, and Akasa Air, a relatively new player, is steadily progressing.
As an economist, Thomsen emphasised the importance of intense competition in driving innovation, services, and lower prices. However, she also warned that if the market becomes too crowded with excessive capacity, there may be financially unsustainable players. Therefore, she advocated for healthy competition with robust and resilient participants.
As the Chief Economist and Senior Vice President of Sustainability at IATA, Thomsen is the representative of a consortium of more than 300 airlines, collectively responsible for over 80 per cent of worldwide air traffic. Several Indian carriers, including Air India, IndiGo, and SpiceJet, are members of IATA.
Regarding the Indian market, Thomsen acknowledged the presence of the right vision but highlighted the need for effective execution. She stated that the positive impact of good policies could be limited if not implemented carefully.
Earlier in the week, India’s Civil Aviation Minister, Jyotiraditya Scindia, announced plans to have over 200 airports, heliports, and water aerodromes in the next five years, along with orders for approximately 1,400 additional planes from domestic carriers.
Addressing concerns about low airfares and high taxes, Thomsen mentioned that this issue is not unique to India. She expressed her perplexity over the tendency to impose more taxes on airlines, considering that they are the least profitable segment in the value chain.
According to IATA’s projections, the global airlines industry is expected to generate revenues of USD 803 billion and a net profit of USD 9.8 billion in the current year. On average, airlines are expected to make a profit of USD 2.25 per passenger.