Financial Daily from THE HINDU group of publications
Friday, Jan 09, 2004
Industry & Economy - Budget
Logistics - Airlines
Domestic airfares set to move southwards by 13-15 pc
New Delhi , Jan. 8
THE Government move to abolish the 15 per cent Inland Air Travel Tax (IATT) is expected to see domestic airfares drop by between 13 per cent and 15 per cent.
In effect, the announcement means that a passenger travelling in economy class by Indian Airlines on the Delhi-Chennai sector will pay Rs 9,780 against the existing fare of Rs 11,215, while a passenger travelling from the Capital to Bangalore will pay Rs 9,500 instead of Rs 10,895 being charged at present.
Similarly, a passenger travelling by the state-owned airline between Delhi and Hyderabad will pay Rs 7,930 as against Rs 9,090 at present while a Delhi-Mumbai economy class ticket will be cheaper by Rs 956 at Rs 6,574.
However, the real benefit of the Government announcement is likely to be felt by the passengers availing themselves of the various advance purchase ticket schemes being offered by the domestic airlines. For example, passengers flying IA between Delhi and Bangalore who have booked their tickets at least 21 days in advance will pay Rs 4,635, which is lower than the Rs 5,750 fare being charged for travel by train in AC-I. The existing 21-day Apex fare on the sector is Rs 5,300.
The reduction in fares of the other domestic airlines - Jet Airways and Air Sahara - is also likely to be similar to what is being offered by IA.
Sources felt that the move to slash by half the excise duty on aviation turbine fuel (ATF), which was also announced today, is likely to help the domestic airlines curtail their losses apart from improving their cash flow management.
Interestingly, the high-power Naresh Chandra Committee, which had been set up by the Government to draw up a road map to make air travel cheaper, had called for replacement of IATT and passenger security fee with a single ad-valorem sector specific cess. The committee submitted its report to the Government in the last week of December.
The Government also did away with the Foreign Travel Tax (FTT) of Rs 500 per passenger that was being levied. All the announcements made today come into effect from Friday.
Meanwhile, the three major domestic airlines said they would immediately pass on the benefits to the passengers.
Welcoming the decision, the Minister for Civil Aviation, Mr Rajiv Pratap Rudy, said that the move will go a long way in making air travel more affordable for the common man.
Similarly, IA's Chairman and Managing Director, Mr Sunil Arora, felt that the most important relief was the slashing by half on excise duty on ATF, a move that is expected to result in an annual saving of about Rs 60 crore for the airline.
"This will help the airline generate more internal resources for its fleet renewal and expansion plans. Besides the sector will further gain on account of abolition of FTT and the new measures announced by the Government for customs clearance of inbound air passengers," Mr Arora said.
The Chief Executive Officer of Air Sahara, Mr U.K. Bose, felt that the Government's decision would have a good impact on the sector. "The Government's decision is likely to result in 2004 registering the highest ever growth in the sector," Mr Bose said.
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