Minister wants airfares cut, airlines unwilling

November 22nd, 2008 - 8:06 pm ICT by IANS  

New Delhi, Nov 22 (IANS) Civil Aviation Minister Praful Patel Saturday asked domestic airlines to cut fares as fuel prices had come down successively, but his suggestion was not well received by carriers like Jet Airways.”Now fuel prices have come down. You must match it with the perception or else you’ll lose the people’s sympathy,” Patel told the HT Leadership Summit, flanked by Jet Airways chairman Naresh Goyal and Kingsisher Airlines chief Vijay Mallya.

“We have a democratic set-up and the government cannot remain immune to the concerns of the people,” said Patel, who has otherwise sought to address the woes of carriers in the past, sometimes even at the cost of angering his cabinet colleagues.

“I expect fares to go down from the New Year,” the minister added.

But Goyal summarily rejected the minister’s suggestion, saying the domestic aviation industry, reeling under losses, was not in a position to cut fares.

“The minister can appoint a regulator and get our audits (books of accounts) checked if we are really making profits. We cannot take a hit on our bottomline by trimming current air fares,” he said.

“If we continue losing, no bank will give us money.”

Mallya remained non-committal, asking for the aviation fuel to be categorised as a “declared good” so as to invoke a uniform sales tax of four percent across the country, as opposed to 35 percent being levied by some states.

“A declared goods status will give is confidence to reduce fares without bothering about the volatility of the oil prices,” Mallya said.

Domestic oil marketing companies have reduced the prices of aviation fuel prices by around 45 percent since August, triggering some hope among passengers of a reduction in fares.

Aviation fuel accounts for some 35 percent of an airline’s operational costs and the reduction in fuel prices was expected to entail a saving of around 10-12 percent.

Giving further reasons for not reducing prices, Goyal said the depreciation in the value of the rupee had also led to accumulation of losses and overheads as expenditure on leased aircraft and maintenance had escalated.

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