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India plans relief package for ailing airline industry

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Staff Writer | September 5, 2018
India said it was working on a relief package for its airline industry, which is forecast to lose up to $1.9bn this financial year due to rising costs and low fares.
Air India
Asia   The government would offer Air India $294mn
Two of the biggest and oldest carriers, Jet Airways and state-owned Air India, are struggling to stem losses in the world’s fastest-growing domestic aviation market, where competition is intense and fuel taxes are high.

Rajiv Nayan Choubey, the top civil aviation bureaucrat, said that help to cut airline costs was on the way along with a planned $120mn capital injection for Air India, according to Reuters affiliate NewsRise.

Choubey, who was speaking on the sidelines of the International Aviation Summit in New Delhi, did not give details of the planned relief package for the industry.

As well as high fuel taxes, Indian airlines are hit by a goods and services tax on maintenance operations that makes domestic work uncompetitive, consulting firm CAPA India said in a report on Monday.

It forecast an industry loss of up to $1.9bn in the financial year ending March 31, up from a January estimate of a loss of $430mn to $460mn, the difference fuelled largely by a weakening rupee and a rise in oil prices.

CAPA estimated that India’s airlines, including Air India, need an additional $3bn of capital in the near term to shore up their balance sheets.

Choubey said the government would offer Air India state-guaranteed borrowing worth Rs21bn ($294mn), along with an equity infusion of Rs8.6bn. “If we do not support Air India, there may be a value erosion,” NewsRise quoted Choubey as saying.


 

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