Union government is seriously deliberating on working out a package for airlines, including Air India, concerned about the financial health of airlines companies. The main reason for the present difficulties is the rising cost of Aviation Turbine Fuel (ATF).
The matter was discussed at the highest level between Finance Minister Arun Jaitley and Civil Aviation Minister Suresh Prabhu last week. Both agreed that the present mounting losses are due to ATF cost which has gone up because of rising fuel cost and weak rupee. During the discussions the suggestion to reduce the excise duty on ATF from 14 percent to 8 percent were discussed as efforts to bring the aviation fuel under GST has not been possible so far. A suggestion to allow overseas loans for working capital requirement was also discussed.
The situation is alarming. Jet Airways suffered a loss of Rs.1323 Cr in June quarter of the financial year whereas budget carrier Spice Jet posted a loss of Rs.38 Cr during the period, after registering profits for 13 consecutive quarters. On the other hand, the country’s largest commercial airline, Indigo, reported 97 percent decline in its profits in the same quarter. The civil aviation ministry is firmly of the view that the ATF should be brought under GST which could provide great relief to the ailing airlines.
For Air India already a relief package is worked out. Government guaranteed borrowing and equity infusion is what is agreed upon. Civil Aviation Secretary, R.N. Chaubey giving details of the package for AI said, “Air India will raise Rs.2100 Cr in government guaranteed borrowing. The loan will be extended by the State Bank of India. The government has approved as equity infusion for the state owned carrier for the ongoing financial year”.
Meanwhile IATA chief Alexandre de Juniac has said that GST on international air tickets violates ICAO principles.