Will the relief mechanism give airlines the thrust they need?

How long and what benefits the airlines would reap from it will be ascertained only over a period of time. But from a short-term perspective, it looks like the airlines should be able to curtail their mounting losses to some extent.
As part of the much awaited respite, the Government has removed the basic Customs duty of 5 per cent on aviation turbine fuel (ATF). Also, the oil marketing companies reduced the sale price of ATF by 15-17 per cent across the four metros on Friday.
Last month, the sector had already got six months to clear more than Rs 2,900 crore previously owed to the domestic oil companies. The domestic airlines have been given a 90-day grace period to clear their current fuel bills.
While the benefits of the package will take some time to show up, the second quarter numbers of airline companies remained gloomy.
And the prime culprit was the high price of ATF. Market experts say cooling of oil prices is likely to bring some cheer, at least in the short term.
“The situation for Indian aviation industry remains the same as what it was couple of months back.
The only silver lining is the falling crude oil prices which, in turn, have brought down the fares of Spicejet, Indigo and GoAir by around 20-40 per cent,” said Mr Hitesh Agrawal, Head of Research, Angel Broking.
However, he said the drop in fare levels has come at a time when people are travelling less. This could hamper airlines’ prospects of reaping benefits immediately. “
03/11/08 Shubhra Tandon/Business Line

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Categories: Indian Aviation- In General Nov 2008