‘Aviation sector needs an immediate bailout

Apr 09,2020

‘Aviation sector needs an immediate bailout

NEW DELHI : India’s civil aviation industry, whose woes have intensified with a clampdown on travel to curb the spread of covid-19, needs a bailout from the government to stay afloat, said Anand Stanley, chairman of the aviation committee of the Federation of Indian Chambers of Commerce and Industry (FICCI), and president and managing director of Airbus India and South Asia.

The industry chamber has written to civil aviation minister Hardeep Singh Puri, seeking an urgent financial rescue package and tax incentives for airlines in line with those given by the US, China and Europe to let the domestic aviation sector continue its operations. These include bringing aviation turbine fuel under the Goods and Services Tax (GST) and a deferment on GST payments by airlines.

In its letter, FICCI said the aviation industry’s cash reserves are fast depleting as they had to ground aircraft. This has pushed many airlines to the brink of bankruptcy and forced many to ask their employees to proceed on leave with pay.

The bailout from the government could be in the form of a short-term loan, or equity infusion, or any other form, said Stanley. Edited excerpts of an interview:

Why have you sought a stimulus package from the government?

The industry has responded to the health and safety regulations put in place by the government. The travel sector is currently under a lockdown, as per the regulation of the government. It is very clear that governments worldwide are, on one hand, driving regulations and lockdowns, but on the other hand, they are also propping up their respective aviation industries (in terms of bailout and tax incentives).

Whether it is the bailout given by Singapore to Singapore Airlines, or by the Australian government or the US government to its airlines, governments globally have announced massive aid programme for their airlines. We (at FICCI) have also urged the government’s urgent attention and intervention in the matter.

Worldwide, we have seen that the first round of aid packages have gone to the most critical sectors, which include transportation and, specifically, airlines. This is the same thing we are seeing in Europe, China, Singapore, Australia and many other regions around the world.

There is an issue of inability of revival of airlines and structural losses of jobs. So, government intervention is necessary. Globally, governments are in the process of considering additional financial packages for the aviation industry, which will enable them to sustain their operations and survive.

No. We are yet to hear from the government.

What’s the immediate amount of fund infusion required to keep the industry from being grounded?

An amount of at least $1 billion should be infused into the industry, during the short term, which will keep it going for a few weeks. The industry will however need much more funds and government support in the longer term to turn around.

The bailout or fund infusion from the government could be in the form of a short-term loan, or equity infusion, or any other form. We have also in the past seen the government make regular fund infusion into Air India to keep it operational. This could be done for the sector too.

What relief measures have you sought from the government?

We have sought tax relief, deferment of payment of GST for airlines, bringing jet fuel under GST, reduction in airport charges and overflight fees, a temporary cut in excise duty on jet fuel, etc, as well as other financial aid.

The sector could see structural job losses or airline closures if relief measures are not rolled out by the government.