Airlines hint at ATF import to fight losses

Written by Agencies | Shaheen Mansuri | Mumbai, Jun 14 | Updated: Jun 16 2008, 05:06am hrs
Feeling the heat from high air turbine fuel (ATF) prices fuelled by rising global crude prices and higher sales tax, Indian air-carriers are mulling jet fuel imports to cut down operation costs.

A high-power meeting of the heads of airlines here late on Friday night to take stock of the situation also discussed rationalising routes on the domestic network.

These two issues will figure prominently in talks between the airline industry and the finance ministry on June 16.

After the meeting, which ended close to midnight on Friday, Kingfisher Airlines chairman Vijay Mallya, who was also the newly appointed chairman of the Federation of Indian Airlines (FIA), an apex industry body of which all the Indian carriers were members, said airlines might resort to importing cheaper ATF as it did not attract sales tax. This will, however, require several logistical issues to be resolved first, he added.

The cost-structure and regulatory issues, if any, remains to be worked out, said Jets executive director Saroj Datta. Datta, who was speaking after flagging off Jets inaugural flight from Mumbai to San Francisco via Shanghai on Saturday morning, said, Imports would attract customs duty and hence we will have to see how the costs ultimately work out, he said.

Mallya said the domestic airline industry was likely to incur losses of around $2billion and this also translated into a revenue loss for the government. In a bid to exert pressure on states to slash sales tax, Mallya said if they did not provide any relief, air-carriers might cut flights across destinations.

State governments also earn huge revenues from airline companies and they should not have any hesitation in coming to our rescue, he added. On an average, states levy a 21% sales tax on ATF, which amounts to almost 40% of airlines operating costs.

Fuel prices, which contributed to around 23% of airlines total input costs earlier, have now shot up to nearly 50% of their total costs.

After global crude prices hit an all-time high of $139 a barrel this month, domestic airlines have been talking of discontinuing routes that do not enjoy high load factors.

Besides Mallya, the meeting was attended by Jet Airways chairman Naresh Goyal, SpiceJet managing director Siddhant Sharma, Air India director-commercial Anita Khurana, GoAir chairman and MD Jeh Wadia and officials from other airlines.