GST, demonetisation may hit aviation sector in 2017: CAPA
The Hindu Business Line
By OUR BUREAU
New Delhi, December 28:
The Goods and Services Tax which is expected to be rolled out in 2017 and the on-going demonetisation drive could impact the growth prospects of the domestic aviation industry in the next fiscal, the Centre for Asia Pacific Aviation (CAPA) has warned.
“The government’s demonetisation move could impact the growth of the domestic civil aviation market by as much as 3-5 per cent in 2017 though the next fiscal is expected to be the third consecutive year of domestic growth above 20 per cent,” CAPA Aviation Outlook for Fiscal 2018 says.
The report states that the effect of the government’s demonetisation move “were still unclear although there is no visible impact as yet,” but cautions that the introduction of the Goods and Services Tax next year may have a “ short-term negative impact” on economic growth for a couple of years until more positive results emerge.
“The introduction of the GST may also reduce growth below projections depending on the tax rates applicable for air travel and inputs,” the report states.
Meanwhile the report estimates that Indian airlines posted a combined profit of $122 million in fiscal 2016 returning to the black at an industry level after a gap of a decade and adds that the Indian market is on track to surpass the 100-million passenger mark in 2017.
“Based on aircraft deliveries, competitive dynamics and a positive outlook for the economy, growth above 20 per cent could continue for up to a further two years,” the report says adding that Indian carriers are scheduled to induct 60-65 narrow body aircraft and 10-12 regional aircraft in fiscal 2018, the report states.
“This ($122 million profit) includes record profits at IndiGo, Jet Airways, SpiceJet, GoAir and Air India Express,” CAPA states.
AirAsia India and Vistara both still in their initial years of operations were, however, loss making as was Air India though the state-owned carrier reported its first operating profit in a decade, the report adds.
The report forecasts that India is set to overtake Japan in 2017 to become the world’s third largest domestic aviation market behind the US and China.
The report adds that Jet Airways is likely to revive its long haul ambitions and possibly join the SkyTeam in 2017 or 2018.
The report cautions that though Air India continues to expand its international footprint primarily using the Boeing 787 aircraft, “viability challenges could start emerging on ultra long haul routes starting from fiscal 2018.”
IndiGo’s domestic market share could touch 55-60 per cent in the next two years, according to the report.
“The domestic market share of full service carriers could fall to 20-25 per cent within two years; Jet Airways and Air India could each see their hold on the market fall to around 10 per cent or less unless they pursue faster expansion,” the report cautions.
“Based on aircraft deliveries, competitive dynamics and a positive outlook for the economy, growth above 20 per cent could continue for up to a further two years,” says CAPA report.