India's air carriers spin loss riddle

Mumbai: India's troubled private airlines have backed off from a threat to halt services on August 18, but the mystery of why one of the world's potentially largest civil aviation markets faces a US$2.1 billion loss this current financial year remains.
The eye of the mystery as to why the sector is bleeding losses on such a scale is why the government levies the world's highest aviation fuel taxes on a fledgling, low-cost air travel revolution that promised to bring the safest and quickest form of passenger travel to millions of first-time fliers.
The mechanics of this why-dun-it would challenge Sherlock Holmes. Aviation turbine fuel (ATF) taxes of between 35% and 60% charged by the central and various state governments have resulted in crippling operating costs, the private airline industry moans, where the fuel bill comprises 30% to 40% of overall expenditure.
Neither Finance Minister Palaniappan Chidambaram, Civil Aviation Minister Praful Patel, Petroleum Minister Murli Deora nor Prime Minister Manmohan Singh have so far come forward with explanations to clear this aero business mystery.
The fact that they, their 790 parliamentary colleagues, thousands of state legislators and their families travel by air on taxpayer money perhaps helps to keep them oblivious to the plight facing would-be air travelers and the struggling industry.
The outlook appeared far more rosy in 2003, when Bangalore-based Air Deccan initiated the budget air travel business in India.
Half a decade later, Air Deccan has gone bust before being sold to alcohol baron Vijay Mallya's Kingfisher Airlines in 2007. Eight other low-cost carriers are struggling not to follow the pioneer in going under.
The stand-off that led to the August 18 strike threat and other stalemates suggest either that vested interests in the Indian government are deliberately choking the life out of low-cost airlines - so as to bring back the earlier consumer-exploiting air monopolies - or the government has forgotten basic realities brought to its notice in 2003.
08/08/09 Raja Murthy/Asia Times Online

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Categories: Indian Aviation- In General Aug 2009