Private domestic carriers in financial stress, asked to take corrective steps: Civil Aviation Minister

Private domestic carriers are in varying degree of financial stress and have been told to take corrective measures to strengthen their balance sheet without compromising the safety of operations, Minister of State for Civil Aviation Mahesh Sharma informed Lok Sabha on Monday.

The Minister was responding to a question on the financial health of the airlines and the measures taken to mitigate the problems.

An assessment of impact of financial stress on safety of operations of private scheduled airlines has been carried out by the aviation regulator DGCA last year, he said.

"It has been found that all private airlines are in varying degree of financial stress," he said.

The domestic aviation sector is a capital intensive one with high operating costs and dollar dominated, and hence affected by fluctuation of exchange rate, he said, adding the airline in particular are affected by the cost of aviation turbine fuel in India.

"The findings of the audit have been individually discussed with the airlines management and they have been asked to optimise their operations and reduce the financial burden without compromising the safety of the aircraft operations and take corrective steps," he said.

Lower fuel prices have helped domestic carriers to trim their combined losses by an estimated 30% at US $1.21-1.27 billion in fiscal 2015, notwithstanding an estimated combined net profit of US $41-67 million reported by the low- cost carriers, Sydney-based aviation think-tank 'Centre for Asia Pacific Aviation' (CAPA) has said in its 2016 aviation outlook last month.

The combined estimated losses of the three full-service carriers - Air India, Jet Airways and newly-launched Vistara - stood at US $1.28-1.31 billion during the period, with the government-owned Air India alone accounting for US $900-920 million, the CAPA had said in the 2016 outlook.

The Minister said that a working group was constituted under the chairmanship of the Civil Aviation Secretary with secretaries from the Ministries of Finance, Financial Services and Petroleum and Natural Gas, DG Foreign

Trade and Joint Secretary Civil Aviation as its members to mitigate factors causing stress in the civil aviation sector and suggest solution to the same.

Based on the recommendations of the Working Group, the Government had increased FDI by foreign airlines to up to 49%, permitted airlines to import jet fuel on user basis.

External commercial borrowing up to US $1 billion was permitted for the aviation sector and to reduce the cost of jet fuel which constitutes 40-50% of the operating cost of the airlines, the Civil Aviation Ministry has written to Chief Ministers of all states to reduce VAT on ATF, he said.