ASSOCHAM seeks hand-holding

Aviation, the sector which was showing an immense promise till about a year ago, is facing head winds with most of the airlines battling a survival issue.

The sector is hit by rising fuel costs and other expenses even as a cut-throat competition is making the aviation firms bleed, the ASSOCHAM has said.

Expressing concern over the sector slipping into a worsening financial situation, week on week, the ASSOCHAM said airlines need a hand-holding across the board, irrespective of their status, whether they are in the private or public sector.

“While the government is injecting funds into Air India, the private sector airlines can be given support by way of reduced taxation on the aviation turbine fuel and a host of other levies by the Centre and the state governments,” the ASSOCHAM Secretary General D S Rawat said in a statement.

“It is a highly employment-oriented sector, which needs to be protected,” he stressed.

He said aviation firms which were commanding a fair valuation in the stock market till about a year ago, are attracting a least amount of interest among the investors, resulting into a massive erosion between 15% and 35-40% in their market capitalisation.

“This has resulted in the inability of the operators to raise any fresh resources either through the equity or even the debt routes. While equity is not commanding much of valuation, the debt is becoming even more expensive,” observed Rawat.

The ASSOCHAM said if the sector does not improve as a whole, it would be a long haul before Air India could be nursed back to health and put on offer for privatisation.

“Even the schemes like UDAN would be impacted by the deteriorating health of the sector,” the chamber said, seeking a thorough policy review as regards the taxation and other levies are concerned. UDAN is a government initiative for airlines and makes air travel affordable for everyone.

Seeking support from the Civil Aviation Minister Suresh Prabhu, the ASSOCHAM said there is a huge cascading effect of the worsening health of the airlines.

“The entire value chain – be it the flying operations or the downstream services like airport operations and then the ground fleet, the impact is felt all across,” Rawat said.

He said, crude oil prices hold the key, but it does not seem to be declining, if not scaling up any further. “Every time, there is a slight geo-political problem in the Middle East, the first sector to be hit is the aviation,” the ASSOCHAM said, the “tail winds have turned into head winds.” fiinews.com