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Airlines seek PM's intervention to face crisis

india Updated: Nov 26, 2011 17:17 IST

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Indigo-President-Aditya-Ghosh-L-and-CEO-Rahul-Bhatia-come-out-after-a-meeting-with-Prime-Minister-Manmohan-Singh-at-7RCR-in-New-Delhi

Cash-strapped Indian airlines today sought Prime Minister Manmohan Singh's intervention to help them face the "bad operating climate" and come out of the deep financial crisis.

Top bosses of the Indian carriers met the Prime Minister for about an hour and suggested measures like rationalising taxes and duties on jet fuel prices and other items to help the ailing industry.

The Prime Minister heard the problems being faced by the airline industry but did not give any assurance, sources said.

Those who attended the meeting with Singh included Jet Airways chairman Naresh Goyal, Indigo promoter Rahul Bhatia, IndiGo CEO Aditya Ghosh, SpiceJet CEO Neil Mills, Kingfisher CEO Sanjay Aggarwal and Go Air owner Jeh Wadia. The airline bosses later had a meeting of their own to discuss the issues in-depth, the sources said.

While the Indian aviation sector has been witnessing a high passenger and cargo growth rate, all airlines have suffered from a high rate of debt and losses.

The Federation of Indian Airlines (FIA), a representative body of Indian carriers, recently warned that "a bad operating climate" in the country might compel some domestic carriers to default in servicing their debt, bringing to them to the brink of closure.

The meeting came in the wake of some airlines like Kingfisher seeking change in the aviation policy to allow foreign airlines to pick up stake in Indian carriers, which is not permitted at present. Some other carriers like Jet Airways and IndiGo are not in favour of such a move.

However, the industry ministry recently moved a draft Cabinet note to allow 26% FDI by foreign airlines in the domestic carriers, though civil aviation ministry wants to cap it at 24%.

"Private airlines in the country are in dire need of funds for their operations and service upgradation to compete with other global carriers," the note circulated by the Department of Industrial Policy and Promotion (DIPP) said.

A senior civil aviation ministry official said, "We will await instructions from the Prime Minister's Office. The civil aviation ministry will take forward a formal proposal for consideration and decision."

Besides rationalisation of taxes and duties on fuel and other items, the airline chiefs are understood to have also sought a review of the policy of allotting bilateral air traffic rights to Indian carriers vis-a-vis foreign carriers, the sources said.

The airlines wanted the government to review this policy, saying there were anomalies relating to the number of destinations India has allowed to foreign carriers and the foreign governments allowing reciprocal rights to operate to those countries.

They also wanted an early resolution of problems relating to the ground handling policy, which is at present in the courts, they said, adding that high airport charges were also affecting the airlines' financial bottom line.

"Indian carriers operate at cost levels that are probably the highest in the world," the sources said, adding that ATF for domestic consumption was 50% higher than the global prices.

In their note, the FIA had estimated that domestic private carriers were likely to report a total loss of Rs 3,500 crore in the first six months of this financial year.

"As a result despite impressive traffic growth, a number of carriers have continued to suffer big losses, which in turn have contributed to delayed payment to banks, fuel companies and service providers," the note said.