Govt says domestic carriers' financial health a concern

The government today expressed concern over the financial health of domestic airlines but ruled out plans of extending financial package to budget carriers.

However, Minister of State for Civil Aviation Mahesh Sharma said state governments have been requested to reduce Value Added Tax (VAT) on ATF as it constitutes a significant part of an airline's total operational costs.

"Government is concerned over financial health of all airlines including budget airlines. No financial package is planned for budget airlines by the government," he said in a written reply to the Rajya Sabha.

Sharma was responding to a query on whether the government is concerned over financial distress of budget carriers and is planning any package for their survival.

Out of nine domestic airlines, only three -- AI Express, Go Air and Indigo -- reported profits in the last financial year, according to data from the Civil Aviation Ministry.

The total loss incurred by seven domestic carries -- including Air India, SpiceJet and Jet Airways -- touched Rs Rs 5,231 crore. Other loss-making airlines were Alliance Air, Jet Lite (P) Ltd and Air Costa.

"Since fuel constitutes about 40-50 per cent of cost of operation of an airline, Ministry of Finance was requested to include Aviation Turbine Fuel (ATF) under declared goods.

"State governments have also been requested to reduce VAT on ATF in their respective states," Sharma said.

In a separate written reply, Civil Aviation Minister Ashok Gajapathi Raju Pusapati said various measures have been taken to help domestic flight operators.

Apart from asking state governments to reduce VAT on jet fuel, the government has allowed direct import of ATF by domestic carriers as "actual users" and permitted foreign airlines to invest up to 49 per cent in scheduled air transport undertaking, among other measures, the Minister said.