Airlines should cut prices: Praful

With domestic air traffic at a five-year low, the men who run India’s two largest private airlines said they would not cut airfares — even as the civil aviation minister urged them to, reports Samiran Saha. See Special | Webcast of Patel, Goyal & Mallya's speech

With domestic air traffic at a five-year low, the men who run India’s two largest private airlines said they would not cut airfares — even as the civil aviation minister urged them to.

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“There is a perception that the government is helping you tide over the difficult times,” said minister Praful Patel on the second day of the Hindustan Times Leadership Summit on Saturday as he referred to the drop in aviation fuel prices. “You must match that perception with lower fares for passengers.”

Jet Airway Chairman Naresh Goyal and Kingfisher Airlines Chairman Vijay Mallya — their companies are in an alliance that controls more than half the market — wanted more sops from the government, including a cut in “inordinately high taxes”, as Mallya put it.

"We understand business and the concept of revenue management,” said Mallya, with some sarcasm. Air fares have almost doubled over the last year.

Mallya argued that the depreciating rupee had increased costs of plane leases and equipment and wiped out the benefits of the fuel-price cut. Goyal offered to open his books for a government-audit—to confirm their beleagured state.

"I certainly would not like to close my company,” Goyal said. “The government can set up a regulator and we will show our books in a transparent manner."

Patel said his government was examining how to reduce taxes on jet fuel but warned that if these benefits too were not passed on, the aviation industry would “lose sympathy” from policy makers and the public.

With each state levying its own taxes on aviation fuel — from four per cent to 30 per cent — India is one the most expensive places to tank up for airlines. Patel acknowledged much needed correction.

"The taxation policies (on aviation fuel) are wrong,” said Patel. “We still fail to acknowledge that air transport is a mode of public transport." He said a regulator to monitor and recommend fares was against free-market principles.

"This industry is a by-product of deregulation,” said Patel. “It will continue to remain as a completely deregulated sector," he said.

"We understand business and the concept of revenue management. Airlines will face difficulties so long as the bogey of high taxes on ATF exists," Mallya said.