IATA: Turbulent times ahead for Indian aviation sector

The Indian aviation industry may not do well this year in the absence of any major structural changes, pex body for the global airline industry IATA's Director General Tony Tyler said here on Today.

"I don't see this year is going to be any easier for Indian carriers than last year. Fuel prices have risen. And there have not been any major structural changes in the industry which will help to offset that particular cost penalty," Tyler of International Air Transport Association (IATA) said in a press conference.

He said it was necessary to suspend Kingfisher Airlines from its clearing house to protect the system.

"The difficulties of Kingfisher are well known...We had to suspend Kingfisher from the travel agency clearing house. We think it is necessary to protect the whole system. It is the system we operate on behalf of hundreds of airlines. We are now discussing with Kingfisher the term on which we can reinstate the programs. The discussions are continuing" the
IATA chief said.

IATA had to suspend Kingfisher after it failed to provide IATA with a cash deposit, required to continue its participation in the BSP and the CASS.

The required cash deposit was intended to ensure the airline is able to meet its financial obligations in the BSP and the CASS, an IATA spokesperson earlier said in a statement
from Singapore.

Tyler also said that the high User Development Charges at airports in Delhi and Mumbai should be relooked by the Government in order to stop further damage to local and international airlines connectivity and foreign tourist arrivals.

"AERA proposed 340 per cent of increase in the UDF at Delhi airport. If it materialises, Delhi will become the most expansive airport. India's aviation industry is sick. Adding a USD 300 million headache to it will pull it in intensive care from a cost perspective," Tyler said.

He added that it is also estimated that a 5-7 per cent decrease in demand will result from the move.

"...it will come with a fall in tourist arrivals and further damage to local and international airline connectivity," the IATA chief said.

He added IATA is also concerned about the application of 10.3 per cent service tax on air tickets as well as to service that airlines purchase like landing and air navigation fees.

Air India pilots go on 'no-pay-no-work' agitation, operations disrupted

Flight operations of Air India were severely affected on Saturday as  a section of its pilots went on "no-pay-no-work" agitation from midnight tonight against the airline management's failure to pay their salary.

Eight flights to Nagpur, Ahmedabad, Chennai, Leh, Bangalore, Bagdogra, Amritsar and Kolkata were cancelled after 12 pilots reported sick this morning.

"We have clubbed the early morning flight to the above destinations with the flights operating later in the day," an Air India official said.

The pilots earlier Friday held a meeting in Delhi, Mumbai, Kolkata and Chennai and decided to go on the agitation from midnight tonight, said a pilot associated with the development.

This is like "work-to-rule", said another pilot who requested anonymity.

"The airline management can pay the oil companies when they refuse to sell them jet fuel. They can pay for car rental when the company asks for payment but they have no money to pay the employees for months", the pilot said.

Air India as lenders reject debt restructuring plan

A debt restructuring plan for troubled national carrier Air India has been rejected by the airline's lenders, a daily business newspaper reported on Wednesday, as bankers refused to take a stake in the loss-making airline.

A consortium of banks with exposure to state-owned Air India, rejected a proposal to convert 60 percent of the carrier's USD 4 billion debt into long-term loans and accept the balance in equity, the report said citing unnamed sources.

"We are not in a position to take any haircut," the unnamed chairman and managing director of a public sector bank involved in the discussions was quoted as saying by the newspaper.

Banks are reluctant to accept dividend-paying equity in the airline given its unprofitability, the report said.

The 26-member consortium, led by State Bank of India and including IDBI and Bank of Baroda, in November gave broad approval to its financial restructuring, a source told Reuters.

Rising oil prices, high taxes of jet fuel and a fierce price war driven by high competition has hurt profitability of Indian airlines, with private carrier Kingfisher Airlines also struggling to repay creditors.

The aviation ministry proposes to provide Rs 330 billion to Air India by 2017 as part of the government's 12th Five-Year Plan, according to a working group report seen by Reuters last month.

A government report in December said the total debt of India's airlines is expected to hit USD 20 billion in the year ending March. Air India is seen contributing more than half of the projected total losses of USD 3 billion for the industry in 2011/12, the Centre for Asia Pacific Aviation has said.