The Civil Aviation Ministry on Friday said it would continue to press state governments to reduce taxes on jet fuel to provide some relief to the cash-strapped airlines which were reeling under the impact of the rupee slide and hike in crude prices.
Industry leaders and experts expressed concern over the rising cost of operations of the airline industry, but cautioned it not to take “irrational steps” like getting into a price war as such a move would further impact their financial bottomline.
“The rise in ATF (aviation turbine fuel) prices will have an impact. We have been requesting the state governments to consider reduction in taxes they levy on ATF, keeping in mind the rising oil prices,” Civil Aviation Secretary K N Shrivastava said on the sidelines of an ASSOCHAM conference on aviation here.
While the governments of Jharkhand, Chhattisgarh, West Bengal, Rajasthan and Madhya Pradesh have reduced taxes on jet fuel, “we are pursuing other states to follow suit and are assuring increased (air) connectivity if they did”, he said.
However, Shrivastava was hopeful that “this fluctuation (in crude prices) is not permanent and it will step back“.
He was also concerned over the possibility of a hike in air fares, saying “we have to ensure reasonableness in fares.”
The slide in the rupee rate vis-a-vis the US dollar would also adversely impact the costs of airlines as a major chunk of their costs, including those emanating from aircraft lease rentals, external commercial borrowings, maintenance, spares, payments to expat crew and staff costs abroad, were linked to the dollar.
“Almost all airline costs are related to the dollar, including fuel. We have to face this reality. A week rupee is a big challenge for the industry,” GoAir CEO Giorgio De Roni told PTI here.
Replying to questions, he said he was “not indicating any fare hike ... but the airline business has to be sustainable.”