Govt likely to bail out ailing airlines

NEW DELHI: Loss-making domestic airlines can hope to finally get some relief from the government. The high-powered committee, examining losses faced by the airline industry, is likely to meet on Thursday. The committee, led by the cabinet secretary, is expected to work out a relief package for airlines which includes temporary reduction in landing, parking and navigation charges, review of route dispersal guidelines and waiver of throughput charges on aviation turbine fuel (ATF).

���Most of the suggestions which we may make in the proposed meeting have been part of the pre-budget recommendations to the finance ministry. As Prime Minister Manmohan Singh has taken the initiative by forming such a committee to bail out airlines, we hope that some positive results come out of the meeting,��� a senior government official said.

The panel, which includes HDFC chairman Deepak Parekh and IIM professor G Raghuram as members, may also consider doing away with the fringe benefit tax (FBT) levied on crew, catering and in-flight entertainment expenses made by airlines. Other members of the committee are secretaries in the ministries of civil aviation, finance and petroleum.

���So far the finance ministry has not considered our demand of notifying ATF as ���declared goods��� but now we think that there is a strong case for it,��� he added. High jet-fuel price has been the major concern for airlines as it contributes to half of the airlines��� total operating cost.

Till last year, ATF constituted around 35% of the airlines��� total cost, but due to spiralling crude price it now forms 50% of the total operating cost in the case of full-service carriers and 60% in the case of low-cost airlines.
nirbhay.kumar1@timesgroup.com

Domestic airlines are expected to lose over $2 billion mainly on account of high fuel price in the current financial year. The aviation industry���s total loss in 2007-08 stood at $1 billion.
To offset mounting losses, airlines have increased fares, but this has not brought respite since passenger traffic has started declining. Due to high cost of air travel, passengers are shifting to other means of transportation such as rail and road.