New Delhi: With the government planning to lower the sales tax on aviation turbine fuel (ATF) for 80-seater jets to 4%, bringing the taxation regime on par with turboprop planes, India’s airlines now have two more aircraft suppliers to choose from for their fast-expanding regional operations.
Seven, among a dozen, Indian airlines will buy at least 26 such planes for regional flights this year, which is nearly double the number in 2006.
Smaller passenger jets and turboprop planes are considered ideal for short-haul regional flights in the country because they consume less fuel and have capacities tailormade for low-capacity routes.
Another key incentive (they fly on fuel taxed at concessional rates), until now applicable to the likes of the popular French-made ATR turboprop planes, has been extended to the regional jets of Canada’s Bombardier and Brazil’s Embraer in the Union Budget for fiscal 2008.
In India, ATF is taxed at an average 23%, including Union and state government sales taxes, but the 80-seater jets will have to pay just 4% from 1 April.
Considering about 40% of the operating costs of airlines in India are accounted by ATF, the savings are enormous for buyers of such planes. Add to this the concessional landing and parking charges and the decision is made for airlines.
Indus Airways, which was to lease a Boeing 737-800 jet in the next two months, now wants to opt for Bombardier’s regional jet CRJ. “You can have only two kinds of aircraft in your fleet. Maybe we will lease Bombardier CRJs instead of Boeing 737-800 after this announcement,” said Indus general manager Suresh Beri.
Chennai-based Paramount Airways, which has five Embraer jets in its fleet, will save up to Rs80 crore on aviation taxes as a result of the lower 4% tax, says its managing director M. Thiagarajan, who does not regret having paid more than double for the jets compared with turboprop planes. Aircraft manufacturers such as Embraer, Bombardier and ATR have been quick to expand their service base in the country to tap demand of up to 80 regional jets within the next three years.
ATR will invest about $70 million (Rs308 crore) as part of setting up its two pilot training centres this year—one along with India’s largest low-cost carrier Air Deccan and the other with Kingfisher Airlines.
With plummeting turboprop sales worldwide, India is a key market for ATR, making up for one-fourth of its $1 billion revenues in 2006.
ATR aims to convince airlines with a local service presence. “Of the 5,000 hours at our Bangalore centre, only 2,500 will be used by Air Deccan. So there is ample scope for other airlines that would like to use them without sending their pilots far,” said Filippo Bagnato, ATR’s chief executive officer, from Toulouse, France.
Bombardier with its CRJ aircraft, already part of the Air Sahara fleet, is establishing a support centre in Mumbai, details of which are not final.
Embraer, with no sales to India last year, says it will service Indian orders from its regional headquarters in Singapore. “These services will consist of training and spare parts support,” Embraer’s managing director (Asia Pacific), J. Bruce Peddle, said in an email interview.
Only five Embarers are flying in the Indian skies now, but will be joined by another 15 that Paramount is buying.