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Airlines look for government bailout

BS Bureau

With the terrorist attacks on the twin towers of the World Trade Centre, all hopes of the domestic airlines to ride high on the tourist season have crashed. Tourist groups in large numbers have cancelled reservations on Indian Airlines.

"It's difficult to give cancellation numbers but there has been virtually no growth in traffic," says a senior Indian Airlines official. IA expected to carry at least 22,000 passengers per day in September up from 18,000 in the previous months. "But there's no increase," he adds.

Jet Airways officials also admit that the passenger load factors have dropped. The decline in foreign tourist traffic would definitely affect a carrier like Jet as it constitutes a high 28 per cent of its total passenger traffic.

Besides the drop in traffic, the airlines are now left to contend with increased costs in terms of insurance premium. IA officials say that if the insurance premia the airline paid in 2000-2001 was close to Rs 600 million, it could go up to between Rs 100 million and Rs 1.3 billion for the next year.

This does not include the $1.25 surcharge per passenger carried that the insurers have imposed on all the airlines after the September 11 attack.

Indian insurance companies led by New India Assurance have, however, managed to strike a good bargain for IA. The state-owned carrier had to shell out only 36 per cent more than the premium it paid last year as the insurers struck the deal at September 11 rates. The airline would, however, have to shell out another Rs 480 million extra because of the war risk surcharge.

So how do the domestic airlines plan to cope with the crisis? Most players say that they are still assessing the situation to draw up their contingency plans. However, the fact remains that both the private operators as well as Indian Airlines have asked for a bailout package for the aviation sector like their counterparts in the US.

According to a Jet official, there is no harm in asking the government for a bailout package. "If even the strong US economy could demand it, why can't we?" he says. The US government has announced a $12 billion bailout package for the American aviation sector.

Though sources in IA say that the carrier is in talks with the government for helping it, it is not in collaboration with the private operators. "Also, we don't know what 'form' will this help take," says an IA official.

Besides seeking help from the government, the airlines are tightening their belts as well. Says the Jet official: "We're taking corrective action and all items of cost are being examined." The steps the airlines are planning include combining flights on some sectors while cancelling those on the unprofitable routes.

IA officials say that route planning is on to match the demand and supply. It could involve re-routing of flights or reduction of frequency on certain sectors.

Will the airlines pass on the increased costs to the consumers and hike fares? Officials say that they will try and hold on to the fares as long as possible. However, it is learnt that players are talking to one another to arrive at a common fare strategy.

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