India's national carrier, Air India, is deferring the payment of staff
salaries to cope with a credit crunch.
Air India recently announced that salaries for July will be paid two
weeks late to its 30,000 staff, angry staff members threatened a
But the airline management says it has little choice in light of the financial crisis it faces.
The airline incurred losses of $800 million last year.
Others have faced losses
Air India is not the only one reporting massive losses. A number of
private airlines, which set up shop in the last five years hoping to
benefit from a growing economy, are also struggling with high debt and
The federal government has promised a bailout package for Air India.
Menon at the Confederation of Indian Industry says other airlines are
also asking the government to consider measures that will help them
reverse the decline in profits.
"There is an issue of
financial viability of the way airlines are functioning," said Menon.
"There is a discussion already going on with the Government of India
trying and seeing the way there could be support mechanisms in this
regard … there is an issue on taxation which at least if it could have
been sorted out it would have been a little more viable."
industry, for example, is hoping for reduction of taxes on jet turbine
fuel, which is the most expensive in India. It also wants the
government to allow foreign airlines to buy equity in domestic
airlines to give them access to fresh capital.
Like the aviation
industry worldwide, the crisis in India was triggered by the high rise
in fuel prices, and declining passenger traffic.
traffic in India fell by 15 percent in April compared to the same
month in the previous year, continuing a steady decline in recent
This has hit hard a sector that expanded massively
until 2007 on forecasts that passenger traffic would grow as increasing
affluence made air travel more affordable. Many airlines bought new
jets. Air India, for example, is taking delivery of 26 new aircraft
But many aircraft are flying with empty seats as
costlier fares have prompted people to cut back on both business and
leisure travel. And the global economic downturn has worsened the
A recent report by the Center for Asia Pacific
Aviation says losses for the fiscal year that ended in March this year
could double from the previous year's losses of $ 1.75 billion.