The travails of the Indian aviation sector will reach the doors of Prime Minister, Dr Manmohan Singh, on Saturday.
The top leadership of Indian carriers is expected to meet the Prime Minister, to emphasise on the rising cost and price fluctuations in aviation turbine fuel (ATF), as well as the issue of the high incidence of taxes on ATF. The airlines are also likely to point out that the impressive growth rates which have been notched up by the sector are likely to slip sharply unless urgent steps are taken.
The issue of raising domestic air fares is also likely to be broached. The industry claims fares in India are as low as one-third of what airlines charge in other similar markets.
The meeting comes as the industry is collectively expected to post record losses of Rs 3,500 crore during the first half of the current fiscal. Jet Airways has posted a loss of Rs 713 crore in the quarter ended September while Kingfisher posted a loss of Rs 469 crore in the same period.
The Government is said to be concerned on the impact that a sick aviation industry could have on the larger economy.
At the meeting, some of the private sector airlines are expected to complain against the state-owned Air India. In the domestic market, some airlines accuse Air India of charging abysmally low fares in order to attract more passengers and boost its bottomline.
In order to bail out the cash-strapped Air India, the Government has agreed to provide Rs 23,000 crore as equity over a 10-year period apart from providing concessions for the aviation turbine fuel provided to the airline.
Earlier this month, the Prime Minister had said that he would speak to the Minister for Civil Aviation, Mr Vyalar Ravi, to explore ways and means in which the airlines could be helped.
At the same time the Prime Minister had said that the private sector airlines should be efficiently managed. “But if they do get into difficulties, we have to find ways and means to help them,” Dr Singh said.
To bail out the industry the Government is looking at various options including allowing foreign airlines to acquire a minority stake in domestic airlines. A final decision on the proposal is expected only after the Union Cabinet gives its approval.
A sudden glut of positive cues revived the fortunes of the aviation stocks at the bourses on Friday. Kingfisher Airlines jumped 7.75 per cent at Rs 27.1 on the BSE; Jet Airways climbed 12.6 per cent to Rs 278.7; and SpiceJet moved up 8.1 per cent to Rs 23.3. Trading volumes have also jumped sharply when compared with their two-week average.
Besides these, the Cabinet clearance of FDI in multi-brand retail also lifted the sentiment for these stocks.