| Patel tells airlines to cut air fares | |
| Press Trust Of India / New Delhi December 17, 2008, 0:15 IST | |
 With jet fuel prices going down, the government today asked airlines to cut fares to boost the falling passenger traffic.
“When ATF (aviation turbine fuel) prices have come down, so should the fares,” Civil Aviation Minister Praful Patel told reporters here.
“In the past when airlines were in difficulty, we helped them by an extra line of credit, staggered repayment of their dues and abolished Customs duty on ATF. It is now imperative for airlines to respond to the situation,” the minister said while replying to a question.
Exuding confidence that the fares would come down in the coming weeks, Patel said Air India officials had informed him that they were working on reducing fares in the near future.
This is the third time in four weeks that the civil aviation minister has asked air carriers, including Jet Airways and Kingfisher Airlines, to cut fares in response to the government’s support to the industry.
State-run oil companies had yesterday slashed jet fuel prices by over 11 per cent, the seventh straight cut since the price soared to an all-time high of Rs 71,028.26 per kl (in Delhi) in August.
Apart from abolishing the congestion charge of Rs 150 and reducing the high fuel surcharge by Rs 400, the carriers have remained non-committal on cutting fares.
Jet fuel makes for about half the operational cost of an airline.
Earlier this month, Air India was the first to reduce fuel surcharge on passenger tickets by Rs 400, a move that was followed by Jet Airways, Kingfisher, the subsidiaries of Jet Airways and Kingfisher, IndiGo and other no-frills carriers.
The boom in Indian aviation has tapered off due to high air fares, primarily caused by soaring fuel prices and rising tax rates on ATF.
The passenger load factor, or the number of passengers carried by the airlines in relation to the number of seats available, showed a marked decline in recent weeks, when the peak travel season began.
With the Lok Sabha elections coming, Patel had recently said the government had a responsibility towards the people. If there were no reciprocal gestures from the airlines to the steps taken to support them, the industry would fail in the eyes of the public. However, he maintained that the government had never dictated pricing by airlines, though his suggestion now was to enable airlines increase their passenger loads and thus revenue.
The ministry had brokered a deal in October between carriers and oil-marketing PSUs to extend the credit period and clear dues amounting to about Rs 3,000 crore by March next year. The 5 per cent Customs duty on ATF was also abolished last month.
A high-level Committee headed by Cabinet Secretary KN Chandrasekhar last month asked the civil aviation ministry to find ways to ensure reduction in air fares, and the finance ministry to rationalise taxes on jet fuel to help the beleaguered airline industry.
The committee, which is studying the severe financial crunch faced by the airline industry, had also asked the finance ministry to examine the pros and cons of making jet fuel a declared goods to bring down its prices.
The cost of jet fuel in India is almost 45-50 per cent higher than that in several cities abroad, including Singapore, Dubai, Bangkok and Hong Kong.
The combined losses of Indian airlines, caused primarily by the high fuel cost, were estimated to rise from about Rs 4,000 crore in 2007-08 to Rs 10,000 crore in 2008-09.
Another major factor affecting the financial health of the aviation industry was the weakening of the rupee against the US dollar.
Substantial payments by the domestic airline industry are made in dollars like rentals for leased aircraft, spare parts, maintenance, foreign crew (mostly pilots) and training.
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