Not easy for airline to turn profit in India: IATA official

It is not easy for an airline to turn a profit in India and a lot of issues such as fare caps and high taxes on aviation turbine fuel (ATF) have to be resolved, a senior IATA official said on Sunday.

Philip Goh, Regional Vice President for Asia Pacific of International Air Transport Association (IATA), made the remarks during a press conference at the 78th annual general meeting of the global airlines body here. When asked if Vistara and Air India should be merged by the Tata Group, he replied, “Both (Vistara and Air India) are full- service carriers. Vistara is still quite small and although they have been in business for 5-6 years, they are still loss making. It is not easy to turn a profit in India. A lot of issues to overcome.”

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Goh said he is sure that some sort of discussion must be happening between the Tata Group and Singapore Airlines on the merger of Air India and Vistara. “It does make sense to look at synergies between two similar full-service carriers, he told reporters. While talking about India, Goh said that pricing ought to be left to airlines and should not be governed the way it is being governed. Goh said that taxation – on fuels and other things – is always an issue for the airlines.

Any measures that are taken by the government that increase costs for airlines is bad for the economics of the aviation sector, he said. The civil aviation ministry had imposed lower and upper limits on domestic airfares based on flight duration when services were resumed on May 25, 2020, after a two-month lockdown due to the pandemic. For example, airlines currently cannot charge a passenger less than Rs 2,900 (excluding GST) and more than Rs 8,800 (excluding GST) on flights with a duration of less than 40 minutes.

The Tata Group took control of Air India and its subsidiary Air India Express on January 27 after successfully winning the bid for the airlines on October 8 last year. The Tata Group has 83.67 per cent shares in AirAsia India whereas the remaining stake in the airline is with Malaysian carrier AirAsia Berhad. Competition Commission of India had on June 16 said it has approved the proposed acquisition of the entire shareholding of AirAsia India Ltd by Air India Ltd. Vistara is a joint venture company with the Tata Group and Singapore Airlines owning 51 per cent and 49 per cent shares, respectively.

“I think Tata’s initiative (to merge AirAsia India with Air India) within their own group is sensible. I think that if you have four vehicles within the same group, you have to find some ways to rationalise the synergies within the group, Goh said. If Tatas form a strategy correctly, Air India could become a very powerful player in the Indian international market, he noted. Air India can certainly be strengthened and if anybody could do it, it is Tatas that could do it, he said. “It is very positive for India that this has happened and we look forward to seeing how this would play out in the next couple of years, he noted.