Shubhra Tandon India is in a crisis as it tries to adjust its infrastructure and, even more critically, its cost structure to the realities of today...,” Mr Giovanni Bisignani, Director General and CEO, International Air Transport Association, said in his speech at Singapore Air Show Aviation Leadership Summit on February 1.

Mr Bisignani's words sums it all up. Lack of infrastructure and high operating cost structures still remain deterrents to the growth of air passenger traffic and air cargo in India. Last year, the International Air Transport Association (IATA) had at various occasions criticised the Government for the levy of Airport Development Fee and User Development Fee.

IATA's 2009 annual report points out that it was a “surprising move” for the Ministry of Civil Aviation to approve a “10 per cent increase in airport charges” at Mumbai and New Delhi airports “without consulting with airlines”. “This was followed by the approval of an airport development fee at New Delhi airport beginning 1 March, 2009. These unjustified rate increases are sure to exacerbate India's growing economic crisis, which yielded $1.5 billion in airline losses in 2008.”
And now, the repercussions of the announcements made in the Budget, with respect to Indian aviation industry, will also need to be seen.

If the proposal to impose Customs Duty on aviation turbine fuel, as mentioned in the Budget, comes through, the airlines are expected to raise domestic air fares by 10-12 per cent.

In 2008, when the oil prices were spiralling, leading to upward movement in air fares, passenger numbers had dipped drastically.

It has also been proposed in the Budget that a service tax of 10 per cent will be levied on passengers for all classes of travel. At the moment service tax is imposed only on international air travel in first and business classes.

This move could negatively affect the domestic air travel market, which was just about on the growth path after a year of gloomy performance.

Coming to development of airports, though the airport modernisation work has begun with new airports in Bangalore and Hyderabad, the upgrade of non-metro airports remains behind schedule. So it may take three to four years before one sees proper facilities across the nation. The work for improving facilities at Delhi and Mumbai airports is also underway.

However, the potential is huge.

According to statistics available with IATA, while in the US there are three aircraft seats a year for each of the 300 million people who live there; India's 1.1 billion population has only 0.1 seats available per person.

The story remains the same for the Indian air cargo market too. Lack of infrastructure continues to be a roadblock for the industry, which is slated to touch Rs 13,300 crore by 2011-12, a growth of 20 per cent, by industry estimates.