New greenfield policy will not yield long-term results: IATA

The biggest airline group – International Air Transport Authority (IATA) – has said that the government’s new green field policy that fixes a per passenger yield criteria as the bidding parameter for future airports would not yield good long-term results.

“We believe it makes no sense to fix a per passenger yield at the outset of the concession contract that is set to run for four decades. We know from bitter experience in Brazil and elsewhere that selecting the company that simply proposes the highest concession fee does not yield good long term results,” Alexandre de Juniac, Director General and Chief Executive Officer, IATA said on Wednesday morning.

He was speaking at the inauguration of a `International aviation summit-India’ which has been jointly organised by Ministry of Civil Aviation, Airports Authority of India and IATA.

The government is proposing starting the Greenfield policy for awarding new airports with the award for Jewar airport, which will serve as the second airport for the national capital region. At the moment the date for bidding has not yet been announced.

With this model, the government has moved from the model choosing the bidder offering the highest revenue share to the government.

The IATA DG also pointed out that applying GST to international tickets violates International Civil Aviation Organisation principles and India’s international obligations. India imposes GST at the rate of 12 per cent on business class tickets and at 5 per cent for economy class tickets sold for international travel.

“These deviations from global standards may have short-term revenue benefits for the government . But it weakens India’s competitiveness by raising the cost of connectivity. And in the current form, airlines continue to face many compliances challenges. We need to resolve these issues soon—aligning with global standards and shoring-up India’s competitiveness,” the IATA DG said.

The IATA’s Director General and CEO also said that India’s aviation sector is projected to see 500 million trips ‘to, from and within’ by 2037.

India’s civil aviation sector has recorded 50 months of double-digit growth and it can be “very easily maintain (that) for next 50 months, provided that all nuts and bolts are in place”, Civil Aviation Secretary R N Choubey said.