Airlines get breather, fliers left in the lurch

The 2% reduction in service tax may lead to a substantial relief for deep-in-red Indian carriers. However, it won't help the common man fly again. The reason: the 12.36% (inclusive of 30% surcharge) service tax was levied on first and business class international air tickets sold in India in the budget of 2007-08.
Now with the service tax rate getting reduced to 10% (effectively 10.3% with surcharge), luxury international air travel booked from India will be cheaper by Rs 2,000 to 7,000. How much of a stimulus it proves to be for tickets in range of Rs 40,000 to Rs 6 lakh remains to be seen. Economy class international tickets are available at rockbottom prices these days and are cheaper by anywhere between 30% and 45% on popular sectors as airlines are finding it difficult to fill planes in this slowdown.
For domestic travellers, this reduced service charge will not translate into any real difference on the Rs 233 paid as passenger service fee (PSF) at Delhi and Mumbai airports (which were recently allowed to hike airport charges by 10% by a benevolent aviation ministry) and Rs 225 at other Indian airports. "The PSF for Mumbai airport will come down to Rs 228.32 from Rs 232.59,'' said an airport spokesperson. The flying business class within India did not attract this service tax anyway.
However, airlines will benefit from this move as they have to pay the tax on a number of services such as catering and ground handling. While major Indian airlines said they could not quantify the benefit, a 2% reduction will mean substantial savings that are unlikely to be passed on to consumers as the carriers have huge accumulated losses and dues. Airlines' fortunes are dwindling as domestic travel has sharply dipped due to a combination of several factors like high fares, economic slowdown and fallout of the Mumbai terror attack.
25/02/09 Times of India

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Categories: Indian Aviation- In General Feb 2009