The Hindu : Business : Patel to take up ATF price issue with oil ministry

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Friday, Sep 29, 2006
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Patel to take up ATF price issue with oil ministry

Special Correspondent

Issues of overcapacity, route rationalisation and problem of fog during winter came up for discussion Discusses overcapacity, route rationalisation with airline CEOs

CAPTAINS GATHER: From left: Minister for Civil Aviation, Praful Patel, with Secretary, Ajay Prasad, Chairman of Kingfisher Airlines, Vijay Mallya, and Chairman, Jet Airways, Naresh Goyal, at a meeting with Chief Executive Officers of domestic airlines in New Delhi on Thursday. — PHOTO: Ramesh Sharma

NEW DELHI: Concerned over the financial health of the aviation sector and mounting losses of airlines, mainly on account of rising prices of aviation turbine fuel (ATF) and overcapacity, Civil Aviation Minister Praful Patel on Thursday assured the chiefs of all major carriers of steps to reduce the ATF prices in line with the global prices.

Mr. Patel said he would take up the issue of high ATF prices being charged by oil companies and the irrational tax structure on it with the Petroleum Minister and the Finance Minister, respectively.

"When the prices of ATF go up globally, oil companies are quick to raise them but when they come down, as has happened over the past two months or so, they do not pass on the benefits to the airlines. I will take up the issue with the Finance Minister as well as the Petroleum Minister,'' Mr. Patel told reporters after a brainstorming session with the CEOs of major airlines.

He said the ATF prices came to about 45 per cent of the operational cost of an airline. High incidence of tax on ATF was also a cause for concern, he added.

"Since aviation is a high-cost business, we do not want airlines to bleed financially. They have brought in large investments to the country and added so much capacity over the past two years and there are valid concerns over high fuel cost. As a Government we want to ensure that the ATF prices do not make a deep dent into airlines,'' the Minister said. All major airlines, including Jet and low-cost Air Deccan and SpiceJet, have reported losses cumulatively running to about Rs. 600 crore.

Though Mr. Patel did not give any estimate of losses incurred by the airlines, he said that reports of losses in the industry were a cause for concern for the Government which did not wish to see any airline declaring itself sick.

Mr. Patel said that issues of overcapacity, route rationalisation and problem of fog during winter also came up for discussion and it was suggested to the carriers that they should shift their focus to newer routes and non-metro connections. He said the issue of "fare war'' did not figure during discussions but added that it was for the carriers to rationalise their fares.

Replying to a query, he said the Government would be "more careful and objective'' in granting licences to new airlines though none of the "serious'' applications was pending with the Ministry.

Citing example of the Federal Aviation Administration (FAA) of the U.S., Mr. Patel said the Government could ask for a detailed business plan and sources of funding from airlines before giving them clearances. "There are issues of shortages of pilots, technicians and constraints at airports. The airport modernisation plan has already begun and it will take three to four years for development plans to be completed,'' he said.

He said all airlines wanted to come under a single umbrella to find solutions to common issues, adding that he would welcome an aviation industry association to take initiative in this regard. Chiefs of Jet, Air Sahara, Air Deccan, SpiceJet, Indigo and public sector Indian attended the meeting.

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