Airlines may cut more flights to fight ATF costs

The airline industry said it would consider deeper cuts in flights and routes to counter rising aviation turbine fuel (ATF) costs and falling passenger growth as a result of rising fares.
This is one of the key decisions taken at a five-hour meeting among airline chiefs Friday, including Kingfisher's Vijay Mallya, Jet Airways' Naresh Goyal, GoAir's Jeh Wadia and SpiceJet CEO Siddhanta Sharma under the umbrella of the Federation of Indian Airlines (FIA).
Meanwhile, the civil aviation ministry has agreed to request state governments to reduce sales tax when the empowered committee of state finance ministers meets on Monday in New Delhi.
State sales tax ranges from 4 per cent to 35 per cent and makes ATF in India one of the most expensive in the world — it accounts for almost half an airline's operational costs in India against a global average of 20 to 25 per cent.
The government's decision to raise ATF prices over 18 per cent last month has forced some airlines to raise fares around 10 per cent, signalling an end to the cheap fare era and rapid growth in passenger traffic. Low-cost carriers have been holding the price line, but this could severely dent their profits. Most airlines are already reporting losses and the industry is expected to lose $2 billion by the end of this financial year owing to aggressive pricing.
16/06/08 Anirban Chowdhury & Manisha Singhal/Business Standard

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Categories: Indian Aviation- In General Jun 2008