Private carriers ask for Rs 4,700-crore bailout

Mumbai: The country’s leading private airlines have sought a Rs 4,700-crore bailout package from the government to counter slowing passenger traffic, rising costs and an industry-wide liquidity crunch. Airline chiefs recently made a presentation to the Prime Minister’s Office to this effect and government sources said some of their demands may be accepted.
The concessions requested include an interest-free loan with a “bullet” (one-time) repayment after three years, putting aviation turbine fuel (ATF) in the “declared goods” category for sales tax relief and scrapping customs (5.15 per cent) and central excise (8.54 per cent) on the fuel.
The industry has also asked for a reduction or withdrawal of duty on spare parts for aircraft maintenance. Airlines have also asked for a 50 per cent reduction in airport landing, route and terminal navigation charges for 24 months for domestic operations and a freeze on increase in airport service charges, sources close to the development said.
Government sources told Business Standard that the civil aviation ministry hopes that its finance counterpart will soon accept the demand to bracket ATF in the declared goods category. This would mean that the differential sales tax that states charge (between 8 and 34 per cent) would be made uniform. This could help the airlines save some cost, since most states charge sales tax on ATF on the higher side.
Aviation ministry sources said the demand to halve airport charges is unlikely to be considered. Also, given that oil prices have dropped below $90 a barrel and are expected to fall further, the grounds for a bailout may not exist in a few months.
Airline companies are expected to log losses of Rs 9,400 crore this financial year on revenues of Rs 28,200 crore. The private carriers, some of which expanded their fleets and launched international routes this year, have failed to garner investor interest (barring low-cost carrier SpiceJet) or raise money from institutions to fund their losses and expansion plans.
10/10/08 Manisha Singhal/Business Standard

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Categories: Indian Aviation- In General Oct 2008