Leading the pack is Vijay Mallya-promoted Kingfisher Airlines, which has 28 aircraft (including 10 wide-bodied ones) due for delivery this year.
The airline plans to take delivery of its wide-bodied aircraft, earmarked for international operations this year, but will revise its entire order book of narrow-bodied aircraft with the European airplane manufacturer Airbus.
Ahead of the June 16 meeting between the Finance Minister and chief ministers, the chiefs of all major airlines met here today and pitched hard for a reduction in sales tax on ATF.
At the meeting, airline chiefs expressed the view that they would be forced to import ATF if discrepancies in sales tax were not removed. Kingfisher Airlines chief Vijay Mallya said while the sales tax was 4 per cent in one state, it was as high as 30 per cent in another. Mallya was elected Chairman of the Federation of Indian Airlines at the meeting.
"We are here to take a long, hard look at our entire order book and discuss our orders with Airbus on whether we want more or few airplanes," Kingfisher's Executive Vice-President Hitesh Patel told Business Standard from Toulouse, France, where he was taking delivery of its first wide-bodied A340.
Meanwhile, other airlines that are planning to cut capacity on the domestic routes are looking at sub-leasing their aircraft to airlines in the growing markets of West Asia, South East Asia and some European countries instead of deferring or cancelling deliveries. These sub-leases are typically for nine to 12 months and airlines expect to earn a premium on the deal.
Airlines can opt for a "wet" sub-lease (which comes with pilot and crew) or a "dry" sub-lease (only the aircraft). Margins for wet leasing are substantially higher than a dry lease.
For instance, Delhi-based low-cost carrier SpiceJet has cut 17 flights on various routes and plans to sub-lease the six Boeing aircraft due for delivery this year instead of cancelling or deferring orders.
Simplify Deccan, India's largest low-cost carrier, has at least four deliveries planned by the end of this year. "We have not yet decided whether to go for a wet lease or a dry lease but we are planning to take the deliveries," said a Simplify Deccan executive. Deccan has already announced that it would cut routes but has not specified which ones yet.
Experts, however, also caution that aircraft deliveries may be impacted if things get worse. "For any impact on this market, major airlines have to collectively look at the order book and reschedule deliveries worldwide. But if fuel prices do not correct then we could have a situation," said Amit Mittal, general manager (India), Veling, a company that sells and leases back aircraft.
The crisis is more pronounced in India because of the prohibitive ATF taxation whereas airlines in West Asia and South East Asia are not impacted so much, he added.
