Aviation stocks hit air pocket after proposed draft amendments to CARs

Stock prices of 3 aviation firms fell 1.3% to 2% at 10:35 IST on BSE after the civil aviation ministry proposed changes to Civil Aviation Requirements to be followed by aviation firms which could result in increase in costs for aviation firms.

SpiceJet was off 1.3% at Rs 62.90. Jet Airways (India) was off 1.9% at Rs 557.65. InterGlobe Aviation was off 2% at Rs 978.50.

Meanwhile, the S&P BSE Sensex was off 286.08 points or 1.07% at 26,349.67.

The Ministry of Civil Aviation said in its proposed draft amendments to Civil Aviation Requirements (CARs) that airlines shall refund all statutory taxes and User Development Fee (UDF)/Airport Development Fee (ADF)/Passenger Service Fee (PSF) to the passengers in case of cancellation of tickets/non-utilisation of tickets/no show. In no circumstances, the cancellation charge shall be more than the basic fare.

In case of denied boarding, flight cancellation and flight delays, the ministry has proposed that an amount equal to 200% of booked one way basic fair plus airline fuel charge subject to maximum of Rs 10,000 would be paid to passengers in case airline arranges alternate flight that is to depart after one hour but within 24 hours of the booked scheduled departure. The ministry has proposed that an airline shall refund an amount equal to 400% of booked one-way basic fare plus airline fuel charge subject to maximum of Rs 20,000 in case where the airline arranges alternate flight that is scheduled to depart beyond 24 hours of the booked scheduled departure. In case passenger does not opt for alternate flight, the airline shall refund full value of ticket and compensation equal to 400% of booked one-way basic fare plus airline fuel charge, subject to maximum of Rs 20,000.

The ministry announced the draft amendments to CAR on Saturday, 11 June 2016. The ministry has invited public comments on the proposed draft amendments to CARs by 27 June 2016.

With regard to checked-in baggage charges, the ministry has proposed that the airline should restrict additional baggage charge at Rs 100 per kg for baggage between 15 to 20 kg. Director General of Civil Aviation M Sathiyavathy was quoted as saying on Saturday, 11 June 2016, that the changes in excess baggage fee norms will be implemented from 15 June 2016.

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