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SpiceJet rescue may only provide temporary relief to India's aviation woes
Rohit Kaul, New Delhi, December 18, 2014

IN a bid to prevent the exit of another domestic airline after the closure of Kingfisher Airlines, the Indian civil aviation ministry has requested banks and other financial institutions to lend US$94 million to SpiceJet, which is currently facing a severe financial crunch.


The ministry has asked regulatory body Directorate General of Civil Aviation (DGCA) to allow SpiceJet to sell advance tickets until March 31, 2015. State-owned oil companies have also been asked to give a 15-day credit limit to the cash-stripped carrier.


Earlier this month, the DGCA had banned the airline from taking advance flight bookings beyond one month as cancellation of flights and non-payment of staff dues marred its operations.


“Indian banks may be requested to give some working capital loan based on the personal guarantee of the SpiceJet’s chairman,” the ministry said in a press statement earlier this week.


SpiceJet’s net debt stood at around US$230 million at end September. The airline has drastically cancelled its flights in December and many pilots have quit the airline due to unpaid wages


According to a civil aviation ministry official who declined to be named, the Indian government is keen to impose a uniform taxation rate of four per cent on aviation turbine fuel (ATF), which currently varies from state to state from four per cent to 32 per cent.


Taxes on ATF in India are one of the steepest in the world, a major reason for the mounting losses of domestic airlines in India.


“Rationalisation of ATF taxes is the immediate need for helping out the domestic airlines to come out from the red,” said Rajji Rai, chairman, Uniglobe Swiftravel.


“The closure of SpiceJet will result in shooting up of fares on the domestic sector, which will affect travel plans of tourists in the current peak travel season,” said Ranjan Kumar Mishra, managing director, Eastern Voyage.


Indian OTA has revealed that spot fares for the country’s top three routes – Delhi-Mumbai, Delhi-Bangalore and Mumbai-Bengaluru – have gone up significantly. The average spot fare on Delhi-Bengaluru sector in December is around US$277, a year-on-year increase of 57 per cent.

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