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Jet, Spice, Kingfisher to cut flights, routes
June, 04th 2008

Jet Airways [Get Quote], SpiceJet, Kingfisher and other airlines have told the government that they would curtail services frequency and air routes to cut losses after oil companies raised the prices of aviation fuel.

"I have been informally told by airlines that they would like to prune their services. Frequency may be decreased," said civil aviation minister Praful Patel, while expressing grave concern about the rising prices of jet fuel. "Airlines may choose to fly less rather than fly more and lose more," he added.

The rationalisation of flights has already started on the short haul routes and will soon extend to the long haul ones. For instance, Spice Jet has cancelled around 15-16 short haul flights in the last two months and will look at pulling out long haul flights soon.

"Our rationalisation will spread across the entire network and we will stop all operations which are not giving us proper yields. This might include metro routes as well," said a Spice Jet executive.

Last month, the Mumbai-based low cost carrier Go Air cut operations to Chennai.

Expressing concerns about the rising ATF prices, Patel spoke about meeting the Prime Minister Manmohan Singh and Finance Minister P Chidambaram in a week to sensitise them about the issue.

"ATF accounts for more than 45 per cent of the airline's costs and this component will increase even more. The prices of ATF have been increasing much more than other petroleum products. In a week, I will make a presentation to the Prime Minister and Finance Minister. We will have to look at various steps for relief," said Patel.

On Saturday night, public sector oil companies announced more than an 18 per cent average increase in the prices of aviation turbine fuel (ATF).

This has resulted in an increase of 8-10 per cent in all ticket fares, with airlines such as Jet Airways and Kingfisher announcing an increase of Rs 300 for short-haul sectors (under 750 kilometers) and Rs 550 for long-haul sectors (over 750 kms).

The respective surcharges for short and long haul sectors now stand at Rs 2250 and Rs 2900 respectively. The ATF prices have gone up at least 5-6 times since 2004.

Asked whether the state governments would be asked to cut the sales tax on ATF to 12.5 per cent, Patel said minimal deduction would be ineffective and the sales tax would have to be cut down to 4 per cen.

Civil aviation sources said a relaxation in norms for flying abroad would be sought even more strongly, so that airlines opting out of domestic routes could expand their operations internationally.

"This (relaxation) is being strongly looked at and will be taken up strongly in the next GoM," said a source in the civil aviation ministry. Apart from national carrier Air India, Jet and Kingfisher-Deccan have received the nod to fly abroad, while Spice Jet is still waiting in the wings.

"The ministry would do well to permit airlines to fly international. This would enable them to try their luck on overseas routes, besides attracting lagging investor interest," said an industry expert.

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