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Indian airline sector hit by ‘perfect storm’: IATA

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Written by editor

NEW DELHI — India’s airline sector has moved into negative growth and urgent reforms are needed if it wants to survive a “perfect storm” hitting the industry, an association said Wednesday.

NEW DELHI — India’s airline sector has moved into negative growth and urgent reforms are needed if it wants to survive a “perfect storm” hitting the industry, an association said Wednesday.

Growth has slowed from 33 percent in 2007 to 7.5 percent for the first six months of this year, Giovanni Bisignani, director general and CEO of the International Air Transport Association (IATA), told business leaders here.

“The global crisis resulting from high oil prices and declining traffic is hitting India hard,” Bisignani said, adding the last two months “have been negative.”

“Indian carriers could post 1.5 billion dollars in losses in 2008, the largest outside the US. Urgent action is needed to help Indian carriers weather the perfect storm of high costs and falling demand,” he said.

The IATA chief said India needed to bring down fuel costs, landing fees and other taxes to remove what he said was a “cost structure that cannot support a competitive industry.”

He also said there was a “lack of transparency” in India’s airport and air traffic control costs, and said the government needed to implement tighter regulation of the sector.

“Infrastructure investments are urgently needed. While Delhi is moving towards the capability of handling 100 million passengers, the situation at Mumbai remains critical,” he said.

Indian carriers have raised fares several times this year to cover rising jet fuel bills.

The airlines were already losing money as a result of fierce competition from new carriers that took off in hopes of attracting the country’s newly affluent middle class.