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Airlines fear 'bankruptcy' despite ATF price cut
Snehesh Alex Phillip in New Delhi
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June 05, 2008 16:40 IST
Airline insolvencies are no longer a distant nightmare for the Indian aviation industry, weighed down by rising operating costs despite jet fuel prices being slashed by 4.3 per cent on Thursday.

Although it stomached a loss of Rs 4,000 crore ( Rs 40 billion) in the last fiscal, the industry's health does not permit it to lose more, increasing the fear that bankruptcies among airlines abroad may soon spread to the Indian skies.

"We have seen an increasing number of bankruptcies of airlines the world over and this can happen in India also," Jet Airways [Get Quote] CEO Wolfgang Prock-Schauer told PTI here.

Quoting IATA figures, he said in the last couple of months 24 global carriers have gone bankrupt unable to bear rising ATF prices. ATF costs in India account for an average 40 per cent of the total operating costs annually.

Maintaining that "50 per cent of the running cost is fuel and its rising price has become a big problem," he pointed out that ATF prices in India was much higher than most of the other countries, primarily due to high taxes.

However, Indian carriers are expected to benefit from a decision of state-run oil firms to cut aviation turbine fuel (ATF) prices by 4.3 per cent, after the government halved customs duty on the fuel from ten to five per cent.

"We must get substantial relief from the fuel burden in order to close the gap partially and come back to viability," he said, adding that since March this year "we have had four increases and this fuel increase amounts to additional $100 million monthly for the industry here."

But the 4.3 per cent cut is hardly any relief when compared to the 100 per cent increase in jet fuel rates in the past year, says an official of another carrier.

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