Global Aviation: A sea-change required for growth

The global aviation sector has been fluttering in the tumultuous skies for a decade now. Airlines are vulnerable to economic cycles. With European woes escalating every moment and given the overall uncertain macro backdrop, the positive impacts arising from lower fuel prices and improved freight market are faded away, leaving the airlines on their beam ends.
Aviation industry, vaunted to provide livelihoods to 57 million people with a contribution of 2.2 trillion dollars in the worlds economic activity, is now reproached of making multi-billion losses for the past few years, thus fettering the industry in utter gloom.
However, the recent results posted by IATA, bear out the notion that "demand for connectivity remains resilient despite the economic chaos." Thus, expanding with an annual growth rate of 5.3 percent, the global aviation sector is expected to hail over 3.5 billion passengers in CY16. This is around 800 million more passengers than were carried by the airlines in CY11.
Out of the additional passengers, over 62 percent are expected to travel on the domestic routes, with the rest travelling on the international corridors. Region-wise analysis reveals that the emerging economies of Asia-Pacific, Latin America and the Middle East are anticipated to experience the most vigorous growth with Asia-Pacific accounting for 33 percent of the global passengers in CY16, up from 29 percent in CY11. This makes Asia Pacific the largest regional market for air transport.
By CY16, the largest domestic passenger market will be the United States, followed by China, Brazil, India and Japan. United States is also expected to boast as the largest international passenger market by CY16 with the United Kingdom, Germany, Spain, and France proceeding in the queue.
As far as the international freight volumes are concerned, growth is expected to come at a pace of three percent per annum to tally 34.5 million tons by CY16. The fastest growing international freight market during CY11-16 will be Sri Lanka succeeded by Vietnam, Brazil, India and Egypt. Europe will experience the lowest international passenger demand growth with a compound annual growth rate (CAGR) of 2.2 percent.
However, the staggering growth projected above, will not come as manna from heaven. Governments need to play an imperative role in achieving this growth objective.
Nevertheless, many governments forgo the benefits of aviation-enabled connectivity for the short-term budgetary and political benefits.
To quote a few examples, UK government increased its Air Passenger Duty while Indian Government introduced Indian service tax on air tickets. Moreover, sales taxes and the imposition of value added tax (VAT) on tickets for international air transport continue to be of great distress to the airline industry. The governments should be aware of the notion that targeting aviation as a revenue source is a blunder.
According to IATA press release, if airline industry growth is held back by even one percentage point, the global economy would be deprived of 14 million jobs and over one trillion dollars in gross domestic product (GDP) contribution. Thus, it should be a no-brainer for the governments to realise the importance of aviation industry and take stringent measures to devise policies that don castigate innovation, tax regimes that don choke growth and profitability and infrastructure that buttress growth.