The demand for low-fare travel is enormous – so both private and public airlines have ordered a record numbers of aircraft.
Expert View
If there were alternative services available in India, one could argue that taxes on aviation inputs encourage local development. However, that is not the case, and it will not be for many years.” —Bruce Ashby, CEO, IndiGo
It is no secret that the civil aviation sector is growing at unprecedented rates and is likely to continue to do so for the next several years. The demand for low-fare travel is enormous – so both private and public airlines have ordered a record number of aircraft.
Low-fare carriers have demonstrated the benefits to passengers of high quality, low-fare travel. It brings families together and helps small and large businesses to grow.
In the US and Western Europe, communities compete to get low-fare service because it spurs economic development and investment in the form of hotels, tourism, small business development, transportation services, restaurants, and the like.
In order to make this possible in India, our airports and air traffic systems need to be upgraded to handle the surge in demand for air travel. A proven way to fund for these needed improvements is to increase landing fees for aircraft, and/or introduce a passenger enplanement fee specific to each airport to fund for improvements at that airport.
Therefore, if an airport has an expensive development project to fund, only the passengers using that airport would pay for it.
Many other nations do not tax the various essential inputs to production such as aircraft financing and foreign pilots, because doing so raises the cost of travel and stifles demand and economic development.
If there were alternative services available in India, then one could argue that these taxes encourage local economic development. However, that is not the case, and it will not be for many years.
Tax revenues may increase even if the tax on jet fuel is lowered because of the massive latent demand for low-fare travel. Finding the balance between lower tax rates offset by higher volumes is the key challenge facing us in this budget and over the next few years.
Bruce Ashby, CEO, IndiGo
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