Thaindian News

New Delhi, Nov 26 (IANS) In an attempt to chart a way out for the cash-strapped aviation industry, Prime Minister Manmohan Singh Saturday met with the heads of all the private carriers.

According to government sources, the prime minister heard the problems being faced by the airline industry like high jet fuel prices due to sales taxes and the need to rationalise the bilateral air agreements with foreign countries.

The prime minister is said to have given no assurance to the airlines’ chief.

“The discussion were primarily about the impact of rising jet fuel prices due to the addition of high sales taxes and levies by state governments, as well as high airport charges,” a senior government official said on the condition of anonymity.

According to the official, the airlines’ chiefs sought a review of the existing bilateral air agreements between India and foreign countries, calling it unfavourable for the domestic aviation sector.

“They (airlines) have asked for a review of the policy as under the agreements the government has given foreign carriers rights to operate to a large number of destinations,” the official said.

Other key issues like proposed foreign direct investment (FDI) by foreign airlines, permission for direct jet fuel imports by aviation companies, and relief by state-run oil marketing companies (OMCS) were also discussed.

The meeting, which lasted for around an hour at the Prime Minister’s Residence 7, Race Course Road, here was attended by Jet Airways’ chairman Naresh Goyal, Kingfisher Airlines’ chief executive Sanjay Aggarwal, GoAir owner Jeh Wadia, IndiGo Airlines’ chairman Rahul Bhatia and SpiceJet chief executive Neil Mills.

Meanwhile, a civil aviation ministry official said they have not received any proposals or instructions from the Prime Minister’s Office.

The development comes as the industry has been facing a “difficult operating environment” which includes rising jet fuel prices, high interest costs and apprehensive lenders.

Owing to high jet fuel and interest costs, three major airlines — Kingfisher, Jet and SpiceJet — have reported heavy second quarter losses.

Kingfisher Airlines alone reported a net loss of Rs.468.66 crore, owing to higher fuel costs and low yields.

The company’s net loss stood at Rs.230.81 crore in the corresponding period of the last fiscal.

Jet Airways reported a net loss of Rs.713.60 crore in the second quarter from a net profit of Rs 12.40 crore in the same period of the previous fiscal.

Even budget airline SpiceJet lost Rs.240 crore in the quarter under review. It had a net profit of Rs.10 crore last year.

Jet fuel prices have increased by 30 percent since December 2010, and the domestic airlines are expected to lose Rs.3,500 crore in the first six months of this fiscal.

Earlier, the department of industrial policy and promotion (DIPP) proposed a 26 percent cap on FDI in the airline sector by foreign carriers.

“Private airlines in the country are in need of funds for operations and service upgradation to compete with other global carriers,” the DIPP note said.

Currently, the government allows for FDI of 49 percent in Indian carriers by non-airline players but bans foreign airlines from directly investing due to security reasons.

On Friday, Civil Aviation Minister Vayalar Ravi announced the meeting schedule and said: “The PM is concerned… It’s the major institution of connectivity, supporting the development of the country.”

Manmohan Singh had said Nov 12: “A private airline has to be managed efficiently, but if there are difficulties, we have to find ways and means to help them.”