Private airlines looking for Rs4,700 crore to bail them out

Mumbai: India's private airlines have asked for a Rs4,700-crore bailout package from the government.

In a bid to address the industry's ailments of slowing passenger traffic, rising costs and the industry-wide liquidity crunch, airline chiefs have made a presentation to the Prime Minister's Office (PMO) asking for a bailout. Government sources indicate that some of their demands just might be accepted.

Concessions requested by the private airlines include an interest-free loan with a one-time repayment after three years, and classifying aviation turbine fuel (ATF) in the "declared goods" category for sales tax relief. They would also like to see the scrapping of customs (5.15 per cent) and central excise (8.54 per cent) on jet fuel.

Additional demands include a reduction or withdrawal of duty on spare parts for aircraft maintenance, and a 50 per cent reduction in airport landing, route and terminal navigation charges for 24 months for domestic operations. A freeze on increase in airport service charges has also been demanded.

Sources in the ministry of civil aviation say that they are hopeful that the ministry of finance would also agree and accept the demands made by the private airlines, and would accept the demand to classify ATF in the declared goods category. 

Accepting this demand would translate into the differential sales tax which states charge that varies between eight and 34 per cent becoming uniform, helping airlines save cost. For passengers, it could mean a marginal reduction in fuel surcharges, according to analysts.

However, sources in the civil aviation ministry sources say the airline's demand for a 50 per cent drop in airport charges will most likely not be considered, and also caution that since the price of oil has dropped below $90 a barrel, the case for a bailout package may soon evaporate in coming months.

Airlines are anticipating an industry-wide loss of around Rs9,400 crore during this financial year.