Hitting an air pocket

The threat by India's private airlines to shut down operations on August 18 was an unmitigated PR disaster. However, clearly, it was a measure of their desperation.The end to the airline industry's downturn is nowhere in sight -- oil prices are again inching upwards and swine flu has not helped matters.Worst of all, banks that once provided a continuous infusion of loans, are now declining to oblige.
Some of the airlines are thus dangerously close to the brink. Losses keep piling up. In Q1 2009-10, Jet Airways lost Rs225 crore, while Kingfisher's loss was Rs240 crore. For most of the airlines, profitability is nowhere in sight.
When the civil aviation minister threatened to invoke the Essential Services Maintenance Act to dissuade a strike, he effectively admitted that the private airlines were providing an essential service. They are helping the country's socio-economic development, assisting trade, commerce and industry, bringing development to less-developed areas and offering air travel to rail travellers. In the process, they also helped promote domestic tourism. Private airlines have offered air passengers much better service that discredited former Indian Airlines, for which passengers had to be on a waiting list for the privilege of experiencing poor in-flight service at extortionate fares.
And what did the airlines get for all their good work for the country? They were offered no tax benefits or concessions when they started operations. The very states that benefited so considerably from their services did not hesitate to impose very high taxes on aviation turbine fuel (ATF) -- in some states at well over 30 per cent-- even before the airlines had attained profitability.
Apart from that, the airlines pay an excise duty (8.24 per cent), an educational cess (3 per cent), throughput fees levied by airport operators and marketing margins for the oil companies (about 20 per cent).Only the 10 per cent customs duty has been waived to date.
07/08/09 Hormuz P Mama/Daily News & Analysis

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Categories: Indian Aviation- In General Aug 2009