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Private airlines dither on withdrawing congestion charge

Private airlines dither on withdrawing congestion charge
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First Published: Thu, Mar 22 2007. 12 17 AM IST
Updated: Thu, Mar 22 2007. 12 17 AM IST
New Delhi: Two days before a deadline for withdrawing the congestion charge imposed by airlines on passenger tickets, India’s top privately-owned airlines had not made up their minds on what to do.
“I have no opinion on the subject,” said Warwick Brady, the chief operating officer of Air Deccan, India’s biggest low-fare airline. “(We) haven’t made up our minds.”
“No decision as of now, and probably not till later,” said a senior official at Jet Airways, India’s biggest airline by market share, who asked not to be identified. Kingfisher Airlines and IndiGo also said they hadn’t decided.
The pressure was building on them to buckle—by Friday. The Directorate General of Civil Aviation (DGCA), at the instance of the civil aviation ministry, had asked airlines who have imposed a nationwide fee of Rs150, to drop it. The government cannot set the price of tickets, it can only request airlines to re-examine levies if they are seen as unfair. The regulatory authority said it hasn’t heard from any of the airlines it wrote to.
After a public interest litigation on the subject at the Delhi high court, the regulatory authority wrote to the airlines saying it had been directed by the court to discuss a scrapping of the charge with the airlines. It sought a reply by Friday.
But analysts say the airlines probably won’t pick a fight with DGCA right now, because they need the ministry’s support on issues such as a reduction in sales tax for aviation fuel. Airlines are currently taxed about 23% for fuel.
“The congestion charge was always a way for the airlines to show their unhappiness with airport conditions,” said a Mumbai-based analyst for a European bank, who is not allowed to be named because of company policy. “And they’ve definitely got the government’s attention.”
Planes in Delhi and Mumbai often hover for as long as 30 minutes as they wait for landing strips because the airports are handling more aircraft than they were built to accommodate.
It may not sound like much, but the Rs150 is key to the bottom lines of the mostly loss-making airlines in India. Air Deccan, for instance, needs around Rs400 more per ticket on its Airbus A320 operations to break even, and withdrawing the Rs150 charge would further push back the prospect of profitability.
Instead, said a spokeswoman for the airline, it would have to absorb the charge into the base ticket price so that Air Deccan can make up the costs of hovering above Delhi and Mumbai airports during rush hours.
For passengers, that’s not good news—they already pay a Rs750 fuel surcharge that was tacked on during last year’s fuel price rise and is still being charged even though aviation fuel prices have dropped by almost a fifth.
On the deeply discounted tickets that airlines are selling on major metro routes, those surcharges—of which not a single rupee goes to the government—can make half or more of an economy ticket price.
For the airlines, passing the costs on to customers in the form of surcharges, rather than base price increases, allows them to point blame at the government for price hikes, and continue to advertise low prices in promotions. Indian, a state-owned airline, does not charge a congestion fee.
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First Published: Thu, Mar 22 2007. 12 17 AM IST
More Topics: Corporate News | Sector Spotlight |