India aviation market growth outlook as IATA’s Willie Walsh flags fuel and tax pressures

India remains a key aviation market, but airlines face pressure from expensive jet fuel, IATA chief Willie Walsh said on Monday. Walsh spoke after briefings that followed the IATA Annual General Meeting. Walsh also flagged taxation as a factor that could curb growth. At the same time, Walsh said the country offers major scope for expansion.

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Walsh said the domestic segment already showed strong momentum, with more room to grow overseas. "The net position in India is very, very exciting and that is proven by the growth that weve seen in the domestic market... I think there would be a very significant growth in the international market in due course as well,\" Walsh said. Walsh described both promise and hurdles.

India aviation market: Fuel costs and currency pressure

Walsh said high fuel costs add strain for Indian carriers. \"That is an additional burden when fuel price is denominated in dollars and youve seen that the rupee has certainly lost value against the dollar in recent years,\" Walsh said. Walsh linked this to higher operating costs. Walsh placed this among the main challenges for local airlines.

Some relief came after the West Asia crisis pushed up fuel costs. Several Indian states reduced value added tax on jet fuel. Jet fuel makes up over 40 per cent of a carrier’s operating expenses. \"It seems somewhat strange that its cheaper to fly internationally than domestically because of the domestic fuel tax in India, but the government has taken measures to dampen that impact, which I think is absolutely the right thing to do,\" Walsh said.

India aviation market: Taxation and regulation concerns

Walsh also addressed India’s regulatory and tax setting during a briefing question. Walsh said high taxation could limit expansion. \"he thinks that the countrys high taxation is going to slow down the potential growth of the market without question.\" Walsh added that tax rates matter for a business-friendly climate. \"If you have a more business-friendly environment where you want to see stronger growth, which I think India needs, then you have to look carefully at what your tax rate is,\" Walsh said.

Walsh said investment in airport infrastructure should support future growth. Walsh also pointed to aircraft supply issues affecting airlines globally. Deliveries are delayed due to supply chain problems. Some aircraft are grounded because of engine issues. Walsh said these factors raised maintenance costs. \"I see these to some degree as being reasonably short-term challenges suffered by everybody,\" Walsh said.

India aviation market: IndiGo leadership change and connectivity focus

Walsh, IATA director general since April 2021, will soon take over as IndiGo CEO. \"I wouldnt be going to IndiGo and India if I didnt think India was a fantastic and exciting market. Those of you who have heard me speak in the last two years, I have consistently highlighted that India is a market that has huge potential and demonstrated the real value of aviation,\" Walsh said. IATA represents over 370 airlines, covering about 85 per cent of global traffic.

IndiGo holds a 65 per cent domestic market share, and India is among the fastest growing civil aviation markets. Walsh said India’s economic aims needed stronger air links. \"For India to fulfil its economic ambition,\" Walsh said it needed wider connectivity at home and abroad. \"India has a fantastic population, a government focused on economic growth, and they value the contribution of aviation,\" Walsh said. \"The opportunities are huge, and I look forward to playing a part in the future for the development of the industry in India,\" Walsh said.

On March 31, IndiGo announced Walsh as its next CEO. The appointment was announced less than three weeks after Pieter Elbers left the role. The exit followed major operational disruptions at the airline in December last year. Walsh’s comments placed India’s growth outlook alongside cost and tax pressures. Walsh also linked progress to fuel tax steps and airport upgrades.

With inputs from PTI