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Airlines in India plan one-day stoppage
Airlines in India plan one-day stoppage03-Aug-2009 |
India's private airlines, awash in red ink, say they will ground their planes in an unprecedented one-day stoppage to demand the government act to ensure their survival.
India's private carriers, which carry about 80 per cent of the country's airline traffic, are caught in a quagmire of soaring losses, high debt and falling passenger numbers. "We need help to stay in business," said Naresh Goyal, chairman of Jet Airways, India's second-largest carrier by market share, as the stoppage for August 18 was announced late last week.
India's airline sector was once vaunted as a symbol of the country's economic vibrancy. But its fortunes have nosedived due to over-expansion, intense competition and expensive fuel and other costs.
The move to suspend flights is to "highlight the urgency for the government to intervene immediately", said Anil Baijal, Secretary-General of the Federation of Indian Airlines (FIA), which represents seven private carriers.
Vijay Mallya, Chairman of Kingfisher Airlines, India's largest airline by market share, threatened the carriers may keep their planes out of the skies indefinitely unless the government takes action.
"Our losses are no longer sustainable," said the billionaire tycoon, whose holdings also include United Spirits, India's largest liquor maker.
"It costs us more to fly than to stay on the ground," he said. The private airlines are pushing their case after the government said it would pump in money to rescue state-run flagship carrier Air India, which is also reeling from losses.
After the government opened India's skies to more competition in 2004, a clutch of new airlines took flight amid predictions of double-digit passenger growth.
But costlier fuel pushed up fares, sending many passengers back to trains. Now the sector has also been hit by a slowing economy, reducing travel. From January to June, airline passengers fell by eight per cent.
The stoppage threat comes as the airlines are announcing new losses. Jet Airways said it lost Rs2.25 billion (Dh172 million) in the first quarter while Kingfisher reported a net loss of Rs2.40bn.
Losses for the entire sector last year are estimated at $2bn (Dh7.34bn) of which Air India accounted for half.
India's airline losses represent nearly a fifth of the $10.4bn loss posted by airlines globally last year even though the country accounts for just two percent of the world's flying public. The government "has to help them [the airlines] reduce high structural costs… the industry now is at a very critical stage," Kapil Kaul, India head of the Centre for Asia Pacific Aviation, said in a recent interview.
The airlines say they want lower airport landing, parking and ground handling charges which they say are 10 per cent more than the global average. But the biggest issue is fuel costs.
Jet fuel is taxed at an average 26 per cent rate by India's states. As a result, fuel costs in India are 50 per cent more expensive than the average paid by airlines globally, said the FIA's Baijal.
The airlines want jet fuel to be declared an essential commodity along the lines of food grains and taxed at four percent. The airlines are being "taxed to death", Mallya told CNN-IBN TV.
"We're not looking for a bail-out and we're certainly not looking for charity," said Mallya, whose airline owes Rs9.5bn in unpaid fuel bills.
"All we're asking for is lower taxes on fuel to bring costs to par with international rates. We can take care of the rest," he said.
The government says it sympathises with the airlines' plight and wants talks but has told them not to suspend their services, warning them of legal action.
"The government understands the problems faced by the sector. But it doesn't support any move that will inconvenience the travelling public," said Civil Aviation Minister Praful Patel.
Mallya, who says the airlines will reconsider their stoppage decision if their problems are addressed, says Air India is not the only carrier deserving government help. "Air India is owned by the people of India [but] we are also owned by the people of India – we have small public shareholders," he said.
(c) Centre for Asia Pacific Aviation. Date posted: 3-Aug-09 In-depth analysis of the Indian airline and airport sectors, including
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