Airlines mull flexible fuel cess to offset losses

Hit by soaring fuel prices, the aviation industry is mulling a differential fuel surcharge based on the value-added tax (VAT) rates in each state.

"Airlines will not survive if the cost of aviation turbine fuel (ATF) remains so high and competition brings down fares," said Air India Chairman and Managing Director V Thulasidas.

The proposal was put forward at an all-India civil aviation meeting attended by ministers and senior officials from various states.

"In some states, sales tax or VAT on ATF is as high as 30-35 per cent. I said at the meeting that airlines would be forced to go for a differential fuel surcharge. We will have to close down if there is no matching hike in air fares," he said.

The Air India chief said the states that charged lower tax rates for ATF would face a lower fuel surcharge. ATF cost in India accounted for 40-45 per cent of airlines' expenditure compared with 18-20 per cent abroad, he added.

Talking to reporters, Thulasidas allayed fears about retrenchments due to the Air India-Indian merger. "People have misgivings about what is going to happen, but we are communicating with them (trade unions) that all jobs are protected," he said.

"Legally, we are one company, but physical integration will take some more time," Thulasidas said, adding that AI would figure in the world's top 30 airlines in revenue terms after the process was over.

AI had also gained strength by joining Star Alliance, he said.

Replying to a question, Thulasidas said the age limit for flying duties would be 45 years and those crossing the age would be posted as ground staff till 58.

"This in no way means that older people are a liability. Experience and expertise matter but it is important to be fit and presentable. The existing crew, however, will continue to be governed by their own service rules," he added.

The Air India chief said the flag carrier would launch new international flights from major cities, including one from Kerala, to improve connectivity to Europe and America.

Asked about the recent passenger protests sparked by flight delays, he said: "We are not the only airline whose flights are sometimes delayed. This can happen to any airline in the world under foggy conditions."

The same was the case with complaints about the "mismanagement" of Haj flights from Kerala, Thulasidas said, adding that "vested interests instigated such protests".