sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
« Sales Tax »
 Clarification on Cash sale of agricultural produce by Cultivators/Agriculturists
 Short-term capital gains are taxable at income tax slab rates in the year of sale
 India imposes regressive nationwide sales tax
 Modification of Circular No.1 of 2014 in view of substitution of Service Tax by Goods and Services Tax (GST).
 Assam government to dismantle all sales tax check-gates post Goods and Services Tax
 Income tax: How to calculate capital gains tax on sale of old jewellery
 Six arrested for posing as Sales Tax officers, extorting money
 Insurance Agency Mergers and Acquisitions in Q1 "Explode," OPTIS Partners' Report Reveals
 Sales tax sleuths raid spare parts shops in Meerut's infamous Sotiganj market
 Income Tax: How offshore income could be taxed twice
 India finalises bills to launch new sales tax in July

How Indias airlines can save fuel and their industry
June, 04th 2008

It would seem the most obvious thing that flights between two cities should take the route that is direct and straight. Yet for various reasons aircraft in this country follow paths drawn up in the days when communication links were limited and aircraft had to fly within the range of certain towns invested with the equipment to track and guide them.

Pilots will tell you that it means the path rarely hugs the straight line, forcing extra kilometres on the journey. For instance, the approved Chennai-Mumbai flight path is a good 14 per cent longer than the straight line, which means the several dozens of aircraft that fly this route each day spend that much extra time and fuel. They do not have to. Modern aircraft fitted with equipment on board can take the flight safely by the shortest route.

Every passenger flying into New Delhi is most familiar with announcements from the cockpit pleading that the aircraft is fifteenth or twentieth in the landing sequence and that the landing would be delayed. If the penalty for the passenger is in the hour extra spent in the air, for the airline it is not just valuable operating time wasted but also fuel.

We burn four tonnes of fuel coming in from Mumbai to New Delhi, explained the captain of an Airbus 320, flown commonly by Air India and Kingfisher airlines. But we could spend an additional tonne of fuel just while holding over Delhi awaiting clearance to land.
Saving on fuel costs

A tonne of aviation turbine fuel costs in excess of Rs 75,000 since June 1. Everyone is aware of the sudden rapid growth in flights and the inability of runways to cope, especially in the peak hour, but pilots are convinced that if they are informed of their landing slots well in advance, they would slow down their descent into Delhi into a fuel-sipping glide, instead of hurtling up to the periphery of the city to get a favourable slot in the landing sequence, only to then burn an extraordinary amount of fuel circling around Delhi at low altitude.

By optimising routes and adopting modern navigational procedure, the Civil Aviation Ministry can help airlines save up to 20 per cent on their fuel charges, and weather the price increases threatening to unravel the industry that, only a year ago, was still able to draw hundreds and thousands of new travellers into the fold with attractive low fares. Through 2006-07, the number of passengers flying the domestic routes rose 38 per cent over the previous year. In 2007-08, with fares rising, the growth rate dropped to 22 per cent.

The teasing one-rupee fares are gone; fuel surcharges levied on each ticket are multiplying. In fact, passengers find the fuel surcharge is now thrice as much as the fare itself.

That is no surprise because the cost of fuel is now as much as 45 per cent of total costs for domestic airlines; when the crude oil cost was more reasonable, fuel constituted just 30 per cent of total costs. Airlines are, therefore, constrained to raise the price of the ticket to compensate for that. And that is not what they would like to do.

Domestic airlines have grown at a frenetic pace, largely on their attractive low prices spearheaded by the clutch of no-frills airlines such as Indigo and Spicejet. The low-fare business model is built on the assumption that they can pretty much fill their aircraft every flight, every day. Low fares pulled in travellers from the train and the bus and pushed occupancy up. Now consecutive doses of the fuel surcharge are taking fares to levels that no longer seem attractive and affordable.
Package of measures

In an unhappy coincidence, new airports have opened in Hyderabad and Bangalore, both situated far away from the heart of the city. Commutes to the airport have got not just longer but costlier, making many travellers consider the train a more viable option for the short trips.

When travellers on the margin defect from the low-cost carriers and their occupancy levels dip even slightly, their business models come unstuck. That is perhaps happening already, with Spicejet reporting a 6-8 per cent drop in loads. Airlines in India together are expected to lose $2 billion this year.

So what can airlines do about their menacing rise in fuel costs? The easiest and quickest reprieve will be to plead with government and get taxes reduced on fuel. Most States levy sales tax at the rate of 20-30 per cent, bloating the price, although Andhra Pradesh reduced it to a benign 4 per cent coincident with the shift of the airport to Shamshabad.

There are suggestions to bring the tax in all States to 4 per cent, but then State government finances are in no great shape either, and given their mounting social obligations, it would be ironical if revenues lost from elite airline passengers were to impinge on expenditure on school education for the under-privileged.

The Civil Aviation Minister, Mr Praful Patel, is obviously a worried man and has hinted that his government would try and craft a package of measures to save the airline industry. He would need to come up with more than just this tax break.

Unlike airlines elsewhere in the world, Indias domestic operators have relatively new and fuel-efficient aircraft. There are no old, fuel-guzzling jets that constrain carriers in the US, for instance. But spoiling the game are outdated air traffic control procedures and exasperating congestion at the metro airports.

The Civil Aviation Ministry and the airlines will have to take cognisance of this, work out intelligent ways to straighten flight paths and relieve the congestion, especially in the metro airports. They have no control over the price of fuel; but they have the power to modify their procedures to save substantial quantities of fuel, and stave off the crisis. Mr Patel must ensure they do.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Content Management System development CMS development Content Management Solutions CMS Solutions Content Management Services CMS Services CMS Software

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions