Demand bailout for mounting losses, say ATF, other charges too steep.
Eight private airline operators, including Jet Airways, Kingfisher, SpiceJet, GoAir and Indigo Airlines, said they will stop domestic operations for a day on August 18 to pressure the government for a bailout and threatened an indefinite suspension if their demands are not met.
Private carriers account for over 80 per cent of domestic flights, carrying over 100,000 passengers a day. The decision for a one-day suspension was taken after a long meeting of the airline association, Federation of Indian Airlines (FIA). The decision does not apply to international operations.
State-owned Air India is also an FIA member but was not party to the decision. FIA members said they would request the airline, which has losses of Rs 5,000 crore, to join the strike.
An Air India spokesperson, however, said, “We are not party to any of these decisions. Arvind Jadhav, our chairman, was not present when these decisions were taken and our flights will move as usual.”
A civil aviation ministry statement added that Air India will mount additional services on August 18 to reduce any inconvenience to the public.
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Paramount Airlines did not attend the meeting, though private airlines said they will try and convince them to join. Paramount executives could not comment on whether they will fly on August 18 or not.
Speaking at a press conference after the meeting, Vijay Mallya, chairman of Kingfisher Airlines, said: “We have been appealing to the government for a long time but have received no response, even when most other sectors have received assistance. Our losses are no longer sustainable.”
According to the FIA, the private carriers together made losses of Rs 10,000 crore in 2008-09 and their accumulated losses stand at Rs 57,000 crore. Jet Airways, the largest private carrier, made a loss of Rs 225 crore and Kingfisher, the second-largest, a loss of Rs 242 crore, in the first quarter.
All airlines, however, are not seeking a bailout. Ajay Singh, director of SpiceJet Airlines, which turned around with a first-quarter profit of Rs 26.3 crore , said, “What we want is to get inputs and the various services for which we pay at international levels. These include aviation turbine fuel (ATF), ground-handling charges and landing and parking charges. We are not asking for a bailout at all.”
The private carriers’ demands have not found favour with the civil aviation ministry.
“There is no question of bailing them out. In fact, the government has been chary about a financial package for Air India – it has put stiff conditions for even an equity infusion,” said a senior ministry official
On the airline’s point that governments in several countries have bailed out private companies especially after the financial meltdown, the official said: “They have also taken control of those companies. Are the private companies willing to do that?”
Hours after the private airlines made their announcement, Finance Minister Pranab Mukherjee said he will talk to Praful Patel his counterpart in the civil aviation ministry about the matter.
An official statement from the cvil aviation ministry said, “The government understands the problem being faced by the aviation sector. However, the government does not support any move that will cause inconvenience to the public. We advise the airlines to engage in a dialogue with the government.”
Private carriers have demanded that ATF, which accounts for 40 per cent of carriers’ operational cost, should be notified under the declared good category, which means it will attract a uniform tax of 4 per cent across the country instead of varying rates that could are as high as 30 per cent in some state.
The ministry stated that the tax on ATF is a state issue and the aviation ministry has been requesting them reduce rates for the last few years. The other issues relate primarily to the slowdown in the economy and the impact of high staffing costs in 2008-09.
Airlines also complain that parking and airport charges are 50 to 60 per cent higher than international levels which have pushed up their costs by $250 million annually.
In addition, a new ground-handling policy (under which airlines cannot undertake their own handling but have to outsource it to mandated authorities) is expected to push up costs for this service 30 to 40 per cent.