Hyderabad: Chief executives of domestic airlines will meet in Hyderabad on Wednesday after the inauguration of the India Aviation 2010 show, to discuss the implications of an expanded service tax regime and more expensive fuel for an industry that is struggling with losses.
Heads of the National Aviation Co. of India Ltd-run Air India, Kingfisher Airlines Ltd, Jet Airways (India) Ltd, SpiceJet Ltd, InterGlobe Aviation Pvt. Ltd that runs IndiGo, and GoAirlines (India) Pvt. Ltd will meet under the umbrella of the Federation of Indian Airlines, or FIA, an industry lobby group.
“On the sidelines of the airshow, we will be meeting to view the various implications of the Budget. That has to be discussed,” said Anil Baijal, secretary general of the FIA. “The concern is there for the entire airline industry.”
Cloudy skies: A view of the tarmac at Begumpet airport in Hyderabad ahead of the India Aviation 2010 show on Tuesday. Mahesh Kumar A / AP
Finance minister Pranab Mukherjee’s Union Budget 2011 expanded service tax to include domestic travel and international flights in any class. It had been applicable only to international first and business class.
The Budget also proposed a 5% customs duty on crude oil, which will make aviation turbine fuel, which accounts for 40% of an airline’s costs, more expensive.
Civil aviation minister Praful Patel is due to inagurate the five-day airshow, which will end on 7 March. Around 200 companies, including 115 from overseas, have confirmed their participation in the event.
An aviation CEO roundtable meeting scheduled to take place soon after the FIA meeting and chaired by Patel is also likely to see the airlines complaining.
The measures proposed in the Budget are “going to hurt,” SpiceJet CEO Sanjay Aggarwal said, adding that the airlines will have no choice but to pass on the cost to consumers, which in turn could affect passenger demand.
FIA had called for the price of aviation turbine fuel to be lowered to help the airline industry, which had posted a loss of $2 billion (Rs9,200 crore) in fiscal 2009. The industry is expected to register a similar loss in the current fiscal ending 31 March.