Praful Patel: To the rescue

Oct. 15: The government is likely to toss a Rs 2,500-crore rescue package for Air India, the state-owned airline.

Civil aviation minister Praful Patel, who inaugurated the country’s first air show for commercial aircraft at Begumpet airport today, was careful not to term it a bailout.

Semantics are important because Patel does not want to attract the ire of private airlines which have been lobbying the government for a Rs 4,500-crore bailout package for the entire industry in the form of duty cuts on aviation turbine fuel (ATF).

The rescue package will include a cash injection of Rs 1,000 crore to Rs 1,500 crore into Air India’s tiny equity base of Rs 145 crore. The rest of the money — about Rs 1,000 crore — will be provided as soft loans.

“The objective is to boost the capacity of the company to meet challenges and competition,” Patel said.

He added that the cash infusion was needed to turn Air India into a viable entity and correct a lopsided structure where the airline had a small equity base and aircraft worth Rs 40,000 crore.

Patel said there were no plans to float a public issue for the airline. “There is no point in talking about a public listing at this juncture,” he said.

The Air India package has raised the hopes of private airlines that a bailout for the industry was imminent.

Patel said he was disappointed that other ministries and most state governments had failed to understand the critical role that the aviation industry played in economic development.

“It is very disappointing and disturbing that they are not taking any positive steps towards reducing the prices of ATF and bringing down state-level taxes to help the cause,” he said in an indirect reference to the lethargy of the petroleum ministry.

But rising above the clamour for a bailout package for the airline industry was a clarion call for a market and price regulatory authority.

“There is a growing demand among private airline operators in the Federation of Indian Airlines for an independent market regulatory body on the lines of the Telecom Regulatory Authority of India,” said a Kingfisher official in Mumbai.

Patel, however, said there were conflicting views on a price regulatory authority. “It will take time as some airlines want it and others don’t. We need to thrash out all the issues.”

Ticket refund rule

Private Indian carriers are asking the government to recall its recent directive on ticket refunds.

The carriers have informed the ministry that the new directive requires them to refund more than 60 per cent of the total ticket fare, which would be a huge drain on revenues.

Airlines are now expected to refund passenger service fees, congestion surcharge and fuel surcharge in case of ticket cancellations. The three components account for around 60 to 80 per cent of the total ticket fare. Currently, carriers refund just the basic fare, which could be as low as Re 1.