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Published by Vipul Aggarwal

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Published by: Vipul Aggarwal on Feb 15, 2012
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Aviation Sector Vipul Aggarwal The position of airline carriers is down grading in India as increasing ATF cost which

constitute mainly 50 % of the total operating cost of airline is climbing up , thanks to the state owned oil companies . These companies slashed price of ATF by 1.3% after 3 continuous price hike is such a big relief for airline carriers . Another news of FDI in aviation sector is a debateable issue . The Finance Ministry with Department of Industrial Policy and Promotions (DIPP) wants cap on FDI to be 26% while Civil Aviation wants limit of 24 % . The limit has huge impact on the aviation industry as 26% cap gives foreign airline carriers veto power which means foreign airline can block the passing of resolutions of domestic airline carriers and according to the SEBI buying 26 % in company lead to open offer in the market and foreign player can buy additional stake of 25% in listed companies . Due to the high exposure to the debt and further requirement of funds forced domestic carriers to sell stake so that FDI brings cash in the aviation sector . Now it depends how foreign carriers see Indian aviation sector despite huge burden of debt and except one airline , all are operating in red continuously . FDI can benefit only LCC as Foreign player can raise money at lower interest rate as domestic rate of borrowing is high and domestic player achieve efficiency and implement strategic decision . But the problem arises in the international operation of both foreign and domestic player as they both compete for the same passenger traffic . Kingfisher and Air India is lobbying hard to get the slash in the duty of ATF which government levies tax of around 35%and Kingfisher lobby hard to DGFT to permit them to import directly . This news can make Kingfisher profitable as today due to supply from state owned companies have inflated cost of ATF more than 83% as compared to international average .

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