The government has no plans to come to the aid of the overtaxed, loan-burdened, distressed and non-profit making domestic airlines sector
At a press conference, Civil Aviation Minister, Ashok Gajapathi Raju, emphatically stated that the Indian government has no plans to come to the aid of the overtaxed, loan-burdened, distressed and non-profit making domestic sector. He was accompanied by GM Siddeshwara, Minister of State.
All that the Government could do, while admitting that the state taxes on the Aviation Turbine Fuel (ATF) was high, was to seek the state governments to consider and make a reduction. At the moment, ATF taxes varies from state to state and ranges from a mere 4% to as high as 30%. He is reported to have further stated that requests have been made to the state governments in this regard. Not all of them have responded favourably, but, presumably, when this eventually starts affecting passenger traffic and airlines start rescheduling their flights, some reasonable reduction is likely to result!
In the meanwhile, good news has come from Go Air, which was launched in 2005 and has currently 13 planes in operation. As against this, Indigo, has a fleet of 78. It was launched in August 2006 and is India's largest in terms of passengers carried. SpiceJet was launched in May 2005 and has a fleet of 53 planes. Except for Go Air, all others have shown losses so far, with the accumulated losses in seven years amounting to $10.6 billion. One of the main reasons why Go Air has shown a profit for the fiscal 2014 is due to better aircraft utilisation, as it has achieved 13 hours use per day against the industry average of 11 hours.
Air Asia, which was launched a few months ago, recently confirmed that they are posting "operating profits". However, CAPA - Centre for Asia Pacific Aviation, in a report, claimed that Air Asia had, in fact, incurred a loss! With a flight load of over 80%, adding five new A 320s, Air Asia is reportedly doing well and it remains to be seen, at the end of the financial year, if it has truly achieved a brake even or made a marginal profit.
SpiceJet, on the other hand, has begun to reduce its international operations and is concentrating on the domestic sector. It has continued its marketing strategy of "early bird" scheme, where the ticket prices are as low as Rs499 on its domestic network. For the time being, it seems, it has decided not to add any more capacity. But it attempts to increase its load factor.
It may be recalled that the Federation of Indian Airlines, consisting of Air India, Jet Airways, IndiGo, SpiceJet and Go Air had made all possible attempts to stop Air Asia and Tata SIA Airlines (now known as Vistara) from being given licence. Other new airlines like Air Costa and Zav have not yet announced if they intend to join the Federation or remain non-committal.
Instead of putting obstacles in the way of Air Asia, Vistara or any other airline that may wish to enter the Indian skies, the Federation of Indian Airlines ought to divert its attention and energy to tackle much vexed issues like the taxes on ATF and get it reduced to realistic levels. It will also be in the industry's interest to take care of passenger safety, comfort and better amenities. They should also be able to negotiate better banking terms to reduce interest charges by assuring the lenders of prompt, timely and regular repayment schedules.
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)