FM's reforms fail to impress airlines bleeding in coronavirus lockdown

Executives said that the government has to help airlines with measures like deferring landing and parking charges and waiving off taxes and duties
The aviation reforms Finance Minister Nirmala Sitharaman listed on Saturday reiterate steps announced before and will not immediately help airlines bleeding in the nationwide lockdown to contain the coronavirus, said industry executives and analysts.

Sitharaman, at a press conference in Delhi, listed "structural reforms" for eight sectors as part of the Rs 20-trillion package Prime Minister Narendra Modi announced earlier this week. She said restrictions on utilising Indian air space will be "eased", six airports will be privatised, private companies will make an additional investment of Rs 12,000 crore on 12 airports auctioned before, and tax structure will be rationailised for the Maintenance, Repair and Overhaul (MRO) industry.

Executives said that the government has to help airlines with measures like deferring landing and parking charges and waiving off taxes and duties. Commercial passenger flights and airport operations are suspended for the lockdown, causing crores in losses.

“I really expect that there will be more announcements in order to provide relief,” said Ajay Singh, CMD and promoter of low cost airline SpiceJet.

Experts said the state-run Airport Authority of India (AAI) has been working with defence ministry since 2014 on a module for Flexible Use of Airspace (FUA). Similarly, the AAI approved a proposal to privatise of six airports—in Amritsar, Varanasi, Bhubaneshwar, Indore, Raipur and Trichy—in December but the union cabinet is yet to approve it.

Sitharaman’s proposal to make India a hub for the MRO industry was talked about in the National Civil Aviation Policy, which was implemented in 2016. In March, the Goods and Services Tax (GST) council reduced the rate of taxation on MRO to 5 per cent from 18 per cent.

Industry demands immediate relief

  • Deferment of airport charges, route navigation charges and jet fuel payment for airlines
  • Government support to raise money from the corporate bond market
  • Interim moratorium of six months on GST payment
“All these measures are long-term steps, the benefits of which if properly implemented, will be achieved may be five or six years down the line. But how many airlines will survive till then?” said an airline executive.
"What has been announced was business as usual policy reforms, not at all in line with what is required to rescue a sector severely impacted by the virus,” said another executive of a private airline.

Experts said the finance minister’s reforms were not concrete and airline promoters will have to infuse more cash to save their companies. Indian airlines, excluding market leader IndiGo, will need to at least $2.5 billion to survive the lockdown, according to research done by aviation consultancy firm CAPA.

“All these steps have been on the government agenda before. We can expect better implementation of them now. In the medium and long term, downsizing of the industry is inevitable unless promoters are able to recapitalise significantly,” said Kapil Kaul, CEO, South Asia at aviation consultancy firm CAPA.

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