India’s aviation industry is currently stuck in an air pocket. The sector has been constantly plagued by mounting debt, losses, and high fuel costs, among other things.
Hence, airlines will be pinning all their hopes on Feb. 01, when the annual budget, the last by prime minister Narendra Modi’s government, will be presented.
It is only natural for them to expect policy favours, given the dire straits they are in and their weak balance sheets.
Jet Airways, India’s oldest private airline and the second-largest by market share, for instance, has been in the news for all the wrong reasons. It has been struggling to pay employee salaries, defaulted on its debt, and is also grounding aircraft. The fourth largest airline, SpiceJet, which nearly drowned in 2013, also posted losses in the first half of the ongoing financial year.
Even market leader IndiGo, never in the red since listing on the stock exchanges three years ago, posted losses in the July-September quarter of this financial year. It recouped, but only just, in the October-December period.
Flagship Air India, of course, has for a while been on ventilator support from the government.
The poor earnings have come despite India’s robust air traffic growth as the aviation companies faced cut-throat competition and volatile jet fuel prices. Most of these airlines, therefore, need big fund inflows to survive. Private airlines do not have deep pockets and they need more investment-friendly policies.
The high expenses on aviation turbine fuel (ATF) are a pain point for most airlines. India’s central government charges 14% excise duty on ATF and state-level taxes can go as high as 29%. So, there is still scope for a policy guideline framework for this sector that will lower the ATF tax burden of the airlines.
The other taxes airlines pay are based on the goods and services tax structure (GST) and therefore not part of the budgetary policy.
To connect unserved and under-served airports, a regional connectivity scheme, UDAN, was introduced. The government’s UDAN policy would definitely boost this growth. But this should result in job creation within the country, not abroad.
30/01/19 Satish Modh/Quartz
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Hence, airlines will be pinning all their hopes on Feb. 01, when the annual budget, the last by prime minister Narendra Modi’s government, will be presented.
It is only natural for them to expect policy favours, given the dire straits they are in and their weak balance sheets.
Jet Airways, India’s oldest private airline and the second-largest by market share, for instance, has been in the news for all the wrong reasons. It has been struggling to pay employee salaries, defaulted on its debt, and is also grounding aircraft. The fourth largest airline, SpiceJet, which nearly drowned in 2013, also posted losses in the first half of the ongoing financial year.
Even market leader IndiGo, never in the red since listing on the stock exchanges three years ago, posted losses in the July-September quarter of this financial year. It recouped, but only just, in the October-December period.
Flagship Air India, of course, has for a while been on ventilator support from the government.
The poor earnings have come despite India’s robust air traffic growth as the aviation companies faced cut-throat competition and volatile jet fuel prices. Most of these airlines, therefore, need big fund inflows to survive. Private airlines do not have deep pockets and they need more investment-friendly policies.
The high expenses on aviation turbine fuel (ATF) are a pain point for most airlines. India’s central government charges 14% excise duty on ATF and state-level taxes can go as high as 29%. So, there is still scope for a policy guideline framework for this sector that will lower the ATF tax burden of the airlines.
The other taxes airlines pay are based on the goods and services tax structure (GST) and therefore not part of the budgetary policy.
To connect unserved and under-served airports, a regional connectivity scheme, UDAN, was introduced. The government’s UDAN policy would definitely boost this growth. But this should result in job creation within the country, not abroad.
30/01/19 Satish Modh/Quartz
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