Airlines on the edge, may report Rs3,500 crore loss for H1: FIA

Mumbai: The Federation of Indian Airlines (FIA), a representative body of Indian carriers, has warned that a bad operating climate in the country may compel some domestic carriers to default in servicing their debt, bringing to them to the brink of closure. In a warning note to the secretary, ministry of civil aviation (MCA), the FIA has said that domestic private carriers are likely to report a loss of Rs3,500 crore in the first six months of this financial year.

In a missive dated 18 October to MCA secretary, Naseem Zaidi, FIA secretary general, Anil Baijal, has said that besides rationalising aviation turbine fuel (ATF) and other taxes and levies, it was also critical to establish appropriate regulatory mechanism that would prevent malpractices like predatory pricing and capacity dumping in the market.

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

Despite all this, fares in India have been the lowest in the world when compared to other mature countries, it argued. "Domestic fares in India are currently as low as one-third of what airlines charge in other countries over similar distances," said the FIA letter furnishing a comparison of fares in different countries.

According to Baijal's analysis, expenditure heads like airport charges, airspace congestion force airlines to lose millions of dollars and interest costs borne by the industry are some of the highest in the world.

"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," it said.

Industry experts, however, point out that the FIA in its letter may have overstated its case somewhat, presenting a distorted version of global and domestic industry conditions, However, the fact remains that the aviation sector in the India is crying out for urgent action in a number of areas, primarily that of ATF pricing.