Saturday, November 12, 2011

Not just Kingfisher, turbulence for other private airlines too

Kingfisher Airlines may not be the lone case to suffer flight cancellations arising out of high debt.

In fact, if the estimate of an industry body is anything to go by, a series of private airlines may follow suit leading to a slew of flight cancellations, inconveniencing passengers.

High fuel costs and fierce price wars have already pushed airline companies to huge losses with aviation turbine fuel accounting for over one-third of operating costs as it is heavily taxed, said the Associated Chambers of Commerce and Industry of India.

“Airlines could suffer losses of about Rs 15,000 crore in the current financial year with Air India alone likely to account for more than half of it,” said Assocham secretary general D.S. Rawat.

As the key infrastructure sector expands to keep up with booming passenger and cargo traffic, investments of Rs 1.5 lakh crore will be required in the next 15 years. In fact, there has been a 19 per cent growth in passenger traffic this year. However, rising crude oil prices, depreciating rupee and cut-throat competition have eroded airlines’ ability to raise fares.

This has pushed major private and government-owned airlines like Air India, Jet Airways, Kingfisher Airlines and SpiceJet into debt turbulence.

Lowering of taxes on jet fuel, liberal foreign investment norms and a new civil aviation policy in tune with current global and domestic realities could be a rescue measure from the government, says the industry body.

The government allows foreign investment of up to 49 per cent in Indian carriers. However, foreign airlines are not allowed to invest directly or indirectly in domestic carriers, a rule the government should scrap for healthy growth of the civil aviation sector, said Mr Rawat.

Airlines need fresh funds and there will be a question mark on their survival if they are unable to raise them, he added.

Calling for streamlining of ground handling operations and lowering of airport charges, the industry body said while there is no import duty for foreign maintenance, repair and overhaul (MRO) companies from overseas suppliers but domestic players have to pay import duty of 30 to 40 per cent.

With passenger throughput expected to touch 54 crore by 2025 and cargo traffic expected to touch 90 lakh tonnes, the government must rationalise the tax structure so that the airline industry can grow, Mr Rawat said.

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