Domestic airlines hit more air pockets

Most airlines (both domestic and international) concede they are likely to put up their fares in a week or two. That does not mean they are giving up on the competitive offers. Two major considerations appe ar to have weighed on the airlines: (1) They are sinking more into the red this fiscal and (2) Occupancy will increase this season and they must cash in on it by the time the season peaks from October to January.
A random check with the domestic airlines shows that a 10-20 per cent increase in basic fares may be announced soon. The airlines wait anxiously for a “relief package” promised by the Union Civil Aviation Minister. A core inter-ministerial group is supposed to be working on this package and the airlines hope something tangible may come out of it before long. The expectations centre on concession in the taxes on aviation turbine fuel (ATF), reduction in the taxes on the purchase of aircraft, and some incentives to enable the aviation industry as a whole come out of the lengthening shadows of losses. According to one estimate, the airlines in India alone could sustain losses this financial year of up to $1.5 billion.
Airline managers explain that over the past four years, the cost of ATF has doubled. Fuel alone accounts for 35-40 per cent of the cost of running an airline. Unfortunately, they have not been able to put up fares because of the competitive environment and the need to shore up occupancy. Most established airlines have signed up massive aircraft acquisition deals that stretch till 2011 as of now, with options to buy more in future. Operation costs have risen, the salaries are inching up, but the fares moved down till now. The presence of the low-cost no-frills airlines has added to the complexities because all airlines seem to be fighting for the same destinations, but may be different market segments.
01/09/08 V. Jayanth/The Hindu

To Read the News in full at Source, Click the Headline

Categories: Indian Aviation- In General Sep 2008