The Hindu Business Line : Airlines’ strike call not too well-timed

New Delhi, Aug. 1 A year after pleas for help to the Government fell on deaf ears, the domestic private sector airlines are again knocking on the Government’s door. This time, the industry has called for a one-day suspension of all operations on August 18 to protest against the Government indifference.

Ironically, the decision comes at a time when the price of aviation turbine fuel (ATF) in Delhi and Mumbai is 48 per cent lower than what it was at the same time last year.

How much

In August last year, a domestic airline was paying Rs 71.02 for a litre of ATF in Delhi while today the cost of a litre is Rs 36.92 (this is marginally up from the Rs 36.33 they paid in the previous fortnight). Similarly, in Mumbai, domestic airlines were charged Rs 77.61 for a litre on ATF in August last while now the price is Rs 38.09 a litre (up from Rs 37.47 charged in the previous fortnight).

However, ATF prices in India are about 65 per cent higher than global benchmarks, largely because different States levy a sales tax, which varies from 30 per cent in Gujarat, 29 per cent in Bihar, 28.75 per cent in Madhya Pradesh to as low as 4 per cent in Andhra Pradesh.

Bad timing

The timing of the industrial action could not have been worse. In June, the industry arrested the decline in domestic air travellers. The number of passengers carried by the nine domestic airlines registered a growth of 5.3 per cent at 36.94 lakh passengers compared with the corresponding period in the previous year.

The industry appeal to the Government for help also comes at a time when the airlines were taking other steps such as laying off excess staff and cutting back on routes to reduce their costs.

Several full-service airlines are looking at lowering their costs by changing their business model and going low cost. Jet Airways, for instance. It launched Jet Konnect a low cost sub-brand in May and expects at least two-third of all its operations to be on this.

While ATF constitutes 45-50 per cent of the cost of operations for most domestic airlines, staff wages account for another 15-20 per cent. The other major expenditures include about 8-10 per cent on navigation and handling and 15 per cent on maintenance costs.

The airlines have also been slowly increasing airfares and returning aircraft or deferring deliveries to stay in the black.

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