The deepening economic crises are forcing the hands of the private airlines in India.

Manisha Singhal of the Business Standard reports that airlines have sought a bailout of almost $1 billion (Rs. 4,700 Crore) amidst losses expected to reach $2 billion this year. Take a cue from the recent $440 million (Rs. 2,000 Crore) bailout of NACIL, the national airline, airline chiefs recently made a presentation to the Prime Minister’s Office to this effect and government sources said some of their demands may be accepted.

What airlines want

• Interest-free loan with a “bullet” (one-time) repayment after three years
• ATF be put under ‘declared goods’ for uniform sales tax
• Reduction or withdrawal of duty on spare parts for aircraft maintenance
• Scrapping customs and central excise on ATF
• 50% reduction in airport landing, route and terminal navigation charges for 24 months
• Freeze on further increases in airport service charges

The concessions requested include an interest-free loan with a “bullet” (one-time) repayment after three years, putting aviation turbine fuel (ATF) in the “declared goods” category for sales tax relief and scrapping customs (5.15 per cent) and central excise (8.54 per cent) on the fuel.

The industry has also asked for a reduction or withdrawal of duty on spare parts for aircraft maintenance. Airlines have also asked for a 50 per cent reduction in airport landing, route and terminal navigation charges for 24 months for domestic operations and a freeze on increase in airport service charges, sources close to the development said.

While the civil aviation ministry hopes that its finance counterpart will soon accept the demand to bracket ATF in the declared goods category, to ensure uniformity and help the airlines save on fuel costs, it is unlikely demands to reduce airport charges, and route and navigation charges will be considered.

Airline companies have been unable to garner investor interest or raise money from institutions to fund their losses and expansion plans.

Private carriers like Naresh Goyal-promoted Jet Airways have commenced "re-organisation" of international operations. Today it annouced, effective January 13, 2009, it will discontinue its Mumbai - Shanghai - San Francisco route, and serve its SFO bound passengers on codeshares with United via London.

No sympathy
While, the airlines are hoping for some positive response from the government soon, they do not have much sympathy from either industry experts or the general public.

Many aviation experts say airlines are themselves to be blamed for the financial crisis. “Could they not see the writing on the wall that crude, as a commodity, will go up? They made their biggest mistake when they started competing with the Indian Railways,” said an aviation analyst who did not wish to be identified.

Just last week, the airlines appeared to be willing to add special fees in the ticket price to cover travel agents' commissions costs, earning them the ire of the travelling populace.

Impact on airports
Delhi International Airport Limited (DIAL), has joined the ranks of other airports in India, Bengaluru International Airport (BIAL), and GMR Hyderabad International Airport (GHIAL), to demand imposition of User Development Fees on passengers. Aviation experts are cautioning about the exaggerated negative impact of these fees, on the Indian aviation industry especially in these tough times. Airports are stuck between a rock and hard place, with no easy options available.

Related articles :

Fuel Populism killing Indian aviation

Air passengers to pay yet another fee

The Karnataka state government is tripping over itself trying to expedite the High Speed Rail Link (HSRL) to the new Bengaluru International Airport (BIA), conservatively expected to cost Rs. 5,200 - Rs. 5,700 Crore by completion date, somewhere by 2012.

The HSRL project has been put on the fast track, and the Karnataka State Industrial Investment and Development Corporation Limited (KSIIDC) has already published a Request for Qualification (RFQ) document on its website. KSIIDC is expected to announce the short-list by October 21. The letter of award to the bidder is estimated for February 16, 2009. Delhi Metro Rail Corporation (DMRC), is the project consultant.

The City Airport Terminal (CAT), the starting point of the HSRL is on Parade Ground next to the Chinnaswamy Stadium on M.G. Road, with stations at Hebbal and Yelahanka. The final station will be at BIA. The first three stations will be elevated, and the BIA station is has not been determined as yet.

I am confused on some aspects of the HSRL when trying to do a sanity check.

Sanity Check 1: Who is the target customer of the HSRL ?
In 2012, assuming the global economy revives in the next 12 months, oil prices reduce drastically, and BIAL's ambition of a south India hub comes true, I can project a maximum growth to 30 million passengers. Which translates to about 500,000 passengers, up and down, per week. Assuming 60% of passengers use the HSRL, this translates to a maximum of 300,000 trips per week.

Assuming 20,000 workers at the airport, if airport workers are added, then the number of weekly trips can increase 50% to 450,000 trips.

The time-table of "airport city" where another 100,000 people are expected to work is unknown at this time. When airport city reaches peak capacity we can assume another 250,000 trips per week.

Each category of person has differing needs.

Sanity Check 2: Convenience
The Central Business District (CBD) which includes M.G. Road area is completely choked with traffic. How many travellers are willing endure the pain and hardship to come to the CAT, and then take a train.

HSRL passengers from Central, South and South East part of Bangalore can still be expected to use the CAT, since it is on the way to the airport. Those from the western, eastern, and north-western suburbs are not going to spend enormous amounts of time deviating from the shortest possible route to come to the CAT. It is unclear if there is a park and ride facility at Hebbal.

Sanity Check 3: Close integration with Namma Metro and BMTC
A lack of close integration with the Metro is another area due for a sanity check. Integration with the Metro is vital for the long term success of the HSRL as it will provide the distributed connectivity to various parts of the city. As per my understanding, the Minsk Square metro station will be connected by a 200 meter walkway to the CAT. 200 meters with luggage does not remotely qualify as integration. There is no information available on whether the Vayu Vajra service will be linked to the CAT.

Sanity Check 4: Affordability
Passengers want to get to the airport in the shortest amount of time and are willing to pay a premium, but the airport worker wants affordability. BMTC has been forced to offer monthly passes on its much vaunted Vayu Vajra service for Rs. 2,500 per month, which translates to Rs. 50 per trip (compared to a planned Rs. 200 on the HSRL), and even this most workers and businesses find expensive.

Sanity Check 5: Financial Viability
If the HSRL will not cater to airport workers, then traffic will drop to 300,000 trips per week. Even at 500,000 trips per week, and at Rs. 200 a trip, the gross revenue will be about Rs. 520 Crore per year. A profit after tax (PAT) of 10% will result in an annual profit of just about Rs. 52 Crore, ridiculously small for a 5,000+ Cr outlay.

I have tremendous regard for Mr. E. Sreedharan, especially his construction achievements on the Konkan railway and DMRC, but DMRC does not enjoy the best of reputations on financial transparency. Sunil Jain's Rational Expectations article in today's Business Standard is a good reality check on how DMRC manipulates or suppresses figures to project a rosy picture, when in reality, it is not.

I am the first person to stand in the Yes column when it comes to better connectivity to BIA, including the HSRL. However, at a time when Karnataka has more pressing infrastructural and social needs, a detailed sanity check is required to ensure the HSRL does not turn out to be another white elephant draining the precious public coffers.