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Friday, January 6, 2012
AIRLINES INDUSTRY - WHAT AILS THEM - WILL AJIT SINGH BE THEIR SAVIOUR?
THE WOES OF AIRLINES INDUSTRY
AIRLINES INDUSTRY has been in dire straits for quite some time.
One after another, each airline is falling prey to increasing costs, decreasing seat occupancy, decreasing profitability and approaching doom.
Government's own Air India (Plus Indian Airlines combine) is in the deepest troubles. Can it survive now - even with huge funds infusion - is a puzzling question in the minds of everybody.
Increasing the fares - has not been able to bring any profitability for any Airline in India - as seat occupancy is coming down.
This means - that seat occupancy in India is directly and proportionately linked to the Fares. Reduce the fares significantly ; then, the seat occupancy - or demand - will go up tremendously; this will make the airlines more profitable.
But, both state and central Governments are highly short-sighted in their taxation Policies. They want to kill the goose that lays the golden eggs. The actual fares charged by most airlines are somewhat reasonable. But, the taxes visible on the Fares (On the ticket itself) are more than 100%. The invisible taxes can well be 200 %.
In the circumstances, there is no doubt that the total fares are beyond the capability of 99% of the Indians. Government should endeavour to bring these fares within the reach of at least 15% of the Indians immediately - and of over 50% over a 5 year time frame. This will certainly ensure all the tax revenue that Government wants - at the same time, ensuring the demand side and profitability of the airlines Industry.
All this means - that tax component on the Air lines expenses side - should come down drastically to LESS THAN 50% OF THE PRESENT LEVELS.
Some people unwisely argue - why cater to the wealthy travelers of India? let them Pay. This is not correct.
First, if the Business man, the executive, the salesman travels by air more frequently than at present, Industry and trade in India will proliferate much more than at present. Air lines is at the centre of all Business activity. It is good for India - if the business man travels more by Air.
Second, The middle class man and the common man must travel by air. Enable him to do so - by reducing the taxes. Let the Air Fares come down to half of present levels.
Government will not be a Loser. Because, Air Traffic will pick up tremendously if this happens. Any number of planes will become justified - and they will all have full occupancy. Airlines will earn good profits on such huge demand. Government will get double or treble the present revenues fro mthe Industry on such surging demand.
Dr.Ajit Singh has said the right things as the Civil Aviation Minister. We need more Air ports, more facilities at Air Ports, much lesser taxes, more demand for Airline seats and - consequent buoyant Airlines Industry, which acts as a fillip for national economy.
An ailing Airlines Industry - is in nobody's interest. It would be utterly unwise to ignore its woes.
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