Mumbai: A sharp rift has emerged within India’s airlines, pitting state-owned Air India against Kingfisher Airlines, which is backed by other private carriers, just as a desperate civil aviation industry is hoping to lobby for key concessions from the government over mounting losses.
The dispute stems from who will lead their industry body, the Federation of Indian Airlines (FIA). The National Aviation Co. of India Ltd (Nacil), which was formed from the merger of Air India and Indian, is challenging the appointment of Kingfisher Airlines Ltd owner, billionaire Vijay Mallya, as chairman.
Now, both have threatened to pull out of the federation.
In a Wednesday letter, Nacil insisted its chairman and managing director Raghu Menon remains FIA’s chairman until October, citing rules of the lobbying group. This came after a 13 June meeting where executives representing the seven member-airlines of FIA, including Nacil, voted Mallya as chairman.
In a Thursday email response to Nacil and other airlines, Mallya fired back. “The FIA is an industry body where the views of a majority of its members will prevail,” he wrote. “If not, Kingfisher Airlines (merged with Deccan), now India’s single largest carrier, will opt out of the FIA.”
Unanimous choice? Vijay Mallya, owner of Kingfisher Airlines. (Hemant Mishra / Mint)
At a marathon meeting held here on 13 June night, FIA appointed Mallya as chairman and asked him to lead the lobbying activities with the government for tax relief on aviation fuel, whose soaring costs are financially crippling almost all Indian airline operators. Taxes and other levies, including sales tax, account for more than 50% of the fuel costs of domestic airlines.
Indian carriers are expected to post a combined loss of $2 billion (about Rs8,500 crore) this fiscal year mostly because of high jet-fuel costs and excess capacity in the market. Aviation fuel prices have tripled over the past three years.
But Nacil notes that the election was never on the agenda for the meeting, something other airline representatives also confirm. Nacil wants the federation to sort out the issue in a formal meeting, but it is unclear why its representatives did not vote against Mallya.
An airline executive, who attended the meeting but didn’t want to be identified, said the new chairman was supposed to be elected after the conclusion of the annual general meeting.
“The item of the election was not there in the agenda,” he said. “But the (federation) has not met for the last seven months. So, it wanted a leadership team to lobby for tax relief.”
Added another executive of a New Delhi-based airline, who also didn’t want to be identified: “Why would be there a difference of opinion as Mallya was elected unanimously? If there was any difference, airline executives could have brought into notice immediately as representatives of almost airlines were present last Friday night.”
A key Nacil executive had left the Friday FIA meeting early while another Nacil representative didn’t speak out during or after the vote. But, Nacil’s Wednesday letter to FIA quotes from the memorandum of understanding setting up the federation.
“The federation will have its own independent secretariat, funds contributed by member airlines, independent auditors and an executive council comprising of airline chiefs, with the chairman and managing director of Air India (now Nacil) as its chairman to oversee the functioning of the federation and to lay down policies.”
Nacil’s term was to end in October.