An Unsolicited Advice to Praful Patel

13 06 2008

The airlines in India are crying hoarse about mounting losses due to rising fuel cost. Vijay Mallya, has declared if the government does not reduce the ATF prices through tax concessions, Kingfisher would be forced to cut flights. Spice Jet has already announced a reduction of flights from 117 to 100 per week. Praful Patel, the Minister has sought the appointment of the PM seeking concessions in taxes to prevent the industry from going belly-up. 

 

Indian, the domestic airline division of Air India, is under direct control of  the Union Ministry of  Civil Aviation. Indian had a 22% market share at the end of 2007-08. It made a loss of Rs 2.75 billion in 2006-07. In 2007-08, Air India is likely to report a loss of Rs 20 billion, out of which Indian’s share will be over Rs 10 billion. The projected losses for 2008-09 will be much higher.

 

Here is an unsolicited advice to the Minister. Instead of giving tax concessions to the industry, the Minister through an administrative order could simply withdraw all passenger flights of Indian, until the situation improves. This would correct the demand-supply situation quickly, improving the viability of the industry. As such the average seat factor for most airlines is less than 70%.

 

This would save the government twice over. It will save the revenue loss by giving tax concessions to the industry. It will alsoreduce losses in Indian. Its staff will be happy coming to work, doing nothing and collecting their salaries. They are quite used to it anyway.

 

– G.Mohan.

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