'We are being taxed to death'

Mumbai: It could not be a more difficult time for the Indian aviation industry. A scenario of rising costs and low fares has made the businesses unviable for most of its players. Take a look at this. The industry has suffered losses to the tune of Rs 10,000 crore with no indication of that number moving southwards.
Among its players, Kingfisher Airlines has, arguably, been the worst hit. On July 31, a worried Vijay Mallya, chairman, Kingfisher Airlines, told the media, “We are being taxed to death.” Bad news for the traveller too since all the private airlines in India have now decided not to touch the skies on August 18. The demand is this – support from the government by way of a reduction in taxes and opening up the sector to foreign direct investment (FDI) which is expected to bring in some much-needed money.
Life has not been easy for Kingfisher for a while now. It had a reverse merger with Deccan Aviation in 2007 which was expected to make it a larger and more competitive player. Sadly, in the time to follow, the company has just faced tougher times.
For the year ended, March 2009, the loss figure read an unenviable Rs 1609 crore, taking the accumulated losses past Rs 2500 crore. The first quarter results have not been any better, with the company being in the red to the extent of Rs 324 crore.
At a macro level, industry trackers point out that the airline industry has been hit by a number of factors. While some pertain to regulation, others are on the operating front. Sales tax on fuel is high with landing fee and parking fee too looking unaffordable.
That’s not all. There is a limit on route flexibility on account of archaic regulations. Kingfisher is upset that it has to operate 300 flights a week to the North-East and J&K when there are often just a handful of passengers in the aircraft.
All said and done, this industry is a cash-guzzler and it is no surprise that a player like Kingfisher has favoured FDI in the sector. The airline is also exploring the possibility of raising Rs 500 crore through a rights issue.
02/07/09 Prashant Mahesh/Economic Times

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Categories: Kingfisher Aug 2009