Address concerns

Address concerns


he private airlines’ demand for a bailout package from the government may have been prompted by the request for a survival package by Air India. They had threatened to go on a one-day strike on August 18, which has now been called off hoping the government meets some of their demands. The aviation industry has been in dire straits for the last two years after a period of fast growth for about a decade. The boom time coincided with the period of high economic growth in the country but the slowing down of the economy affected the industry badly. In fact the aviation industry the world over has been hit badly and companies have even gone out of business. India’s private aviation industry is young as the sector was opened up only recently and the airline companies have done well with competition, consolidation and offer of good services. Their problems need to be addressed sympathetically.

The airlines have claimed that they suffered losses to the tune of Rs 10,000 crore last year. Much of the losses have come from increased Aviation Turbine Fuel (ATF) prices and high ground handling, landing and parking charges. The fall in traffic as a result of the economic slowdown also contributed to loss of revenue. The sales tax on ATF is a state subject. The Centre has been asking state governments to reduce the tax and can put more pressure on them on the matter. The possibility of reduction in airport charges may be examined. But they need to be at an optimum level so that the companies that run the airports can also sustain themselves. Both ATF prices and airport charges are much higher than international prices, though there are reasons specific to India for this.

The private carriers cannot compare themselves with Air India. Even if Air India’s request for a bailout is accepted it should be with conditionalities which, in the private carriers’ case, will be considered interference in their functioning. While the government can try to help the industry to its best by facilitating reduction of various taxes and charges, the carriers can also help themselves better. There is scope for more steps for internal cost reduction and improvement of operational efficiencies. It is not advisable for the industry to go on a strike which will cause much inconvenience to the public, as it has already drawn the attention to the problems of the sector.

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