Times of India
NEW DELHI, May 29: Rising fuel prices have affected revenues of airlines to such an extent that they are now having to cut flights and postpone plans for fleet acquisition for the domestic sector. They also face the prospect of a sharp slowdown in growth that may last a while.
The situation has become alarming enough for the government to call a meeting of airline chiefs to review the growth of the industry as it has a direct impact on airport expansion plans. Along with private players, the Airports Authority of India plans to spend Rs 45,000 crore in the coming years on airport infrastructure.
The CEOs of all domestic airlines will meet top officials of the civil aviation ministry on June 4 to discuss issues like the price of aviation turbine fuel, sales tax, demand for higher aeronautical charges at Delhi and Mumbai airports, and new levies.
Airport developers, both private and AAI, are feeling the heat. Delayed payment from airlines has become an endemic problem. "Among Indian carriers, only one private player is prompt with payment and gets a rebate for paying on time. For others, delay of a month or two has become common. To top it, airports in Delhi and Mumbai have also been disallowed to raise their aero charges by 10% this year," said a top airport developer.
Airlines go slow on aircraft purchase
As delayed payment from airlines has become an endemic problem, a top airport developer says, "The AAI is not allowed to levy user development fee as in Hyderabad, Bangalore and possibly Delhi to fund their ongoing projects. Funding huge airport plans at a time when industry sentiment is low could mean difficulty in raising money."
"Airlines have started tweaking their traffic growth figures and postponed aircraft acquisition for expansion on domestic routes. On June 4, we are going to seek their views on growth levels in coming times as oil prices are unlikely to cool off in a hurry. We need to have a realistic view of growth," said a senior government official.
In the past six months alone, fuel surcharge has increased from Rs 1,650 to Rs 1,950 (for short sector domestic flights) and Rs 2,350 for medium haul ones. Considering a basic fare of Rs 2,500 and other charges, cost of flying has gone up by anywhere from 12% to 18%. But despite these hikes, airlines are still reporting huge losses and are considering another fare hike.