For Indian carriers such as Jet Airways India Ltd. and SpiceJet Ltd. that are struggling with $10 billion of losses, Prime Minister Narendra Modi may be offering some succor.
The government is considering easing rules that force local airlines to serve the nation’s remote locations despite little demand. Under proposed changes, smaller private operators plying these routes would be given credits, which larger carriers would be able to buy to meet the capacity regulations, without having to actually fly to those destinations.
“Bigger airlines lose a lot of money flying in those areas where passenger loads aren’t very high,” G. Ashok Kumar, a joint secretary in the Ministry of Civil Aviation, said in an interview in Bengaluru, formerly Bangalore. The system of credits would free up larger planes, while giving smaller carriers incentives to head to far-flung places, he said.
Loosening the 20-year-old rule might provide some respite to the airlines as it would let them cut consumption of jet fuel, which accounts for about 50 percent of their costs. State taxes as high as 30 percent make jet fuel in India the costliest in Asia, causing defaults by some carriers on payments to banks, vendors, airports and staff.
11/03/15 Anurag Kotoky/Bloomberg
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The government is considering easing rules that force local airlines to serve the nation’s remote locations despite little demand. Under proposed changes, smaller private operators plying these routes would be given credits, which larger carriers would be able to buy to meet the capacity regulations, without having to actually fly to those destinations.
“Bigger airlines lose a lot of money flying in those areas where passenger loads aren’t very high,” G. Ashok Kumar, a joint secretary in the Ministry of Civil Aviation, said in an interview in Bengaluru, formerly Bangalore. The system of credits would free up larger planes, while giving smaller carriers incentives to head to far-flung places, he said.
Loosening the 20-year-old rule might provide some respite to the airlines as it would let them cut consumption of jet fuel, which accounts for about 50 percent of their costs. State taxes as high as 30 percent make jet fuel in India the costliest in Asia, causing defaults by some carriers on payments to banks, vendors, airports and staff.
11/03/15 Anurag Kotoky/Bloomberg
