Mumbai, June 14 : Chairman of the Federation of Indian Airlines (FIA) and Chairman of Kingfisher Airlines Limited, Vijay Mallaya on Saturday mentioned reducing service and connectivity if the central government did not pay heed to their demand of reduction in sales tax.
Mallaya told reporters today after the meeting of airline chiefs in Mumbai on June 13 that reducing services seem to be the only option to them.
"The decision is that if government doesn't provide release we would have no option but to reduce our frequencies and our services, and connectivity will suffer. And people will not be able to travel as seamlessly as they do across the country," Mallya told reporters in Mumbai on Saturday.
Sales taxes are fixed by states without reference to the Central government, and Aviation Turbine Fuel (ATF) is taxed by between four to 28 per cent across the country.
Jet fuel makes up about 45 per cent of an airline's operating costs, and the benchmark domestic price of ATF has risen nearly 46 per cent since January to above 66,000 rupees a kilolitre as the cost of crude oil has surged to record highs above 130 dollars a barrel.
Airlines in India are also keeping import of ATF as an option if government fails to find an apt solution.
Meanwhile Saroj K Dutta, Executive Director, Jet Airways said that importing cheaper ATF can be an appropriate solution.
"If the government has given us an indication that you can look at the possibilities to import in, since these oil companies are owned by government also. We will go and talk to them and find out that under what terms it is possible.... We will find possibilities. And why should they say no," Dutta told reporters during the launch of Jet Airways's daily service between San Fracisco International Airport and India.
State-run Indian Oil Corporation, the country's largest jet fuel supplier, has raised fuel prices by 18.6 per cent, effective from June 1, and its domestic prices have now risen nearly 90 per cent since last June, mirroring a surge in global crude rates.
Union Civil Aviation Minister Praful Patel met Prime Minister Manmohan Singh earlier this week to discuss the matter.
The airline industry is expected to lose 80 billion rupees in the year ending March 2009, double that of a year ago, largely due to the surge in ATF prices.