Financial and Administrative Measures in Aviation Sector


The Government has taken several measures to tackle problems in the sector like persuading state governments to reduce Value Added Tax (VAT) on Aviation Turbine Fuel (ATF), allowing direct import of ATF by Indian Carriers as actual users, permitting foreign airlines to participate upto 49 percent in the equity of scheduled air transport undertaking, allowing External Commercial Borrowings (ECB) for working capital requirement of airline industry for a period of one year subject to a total ceiling of US $ 1 billion and tax concession for parts of aircraft and testing equipment for third party maintenance, repair and overhaul (MRO) of civil aircraft.

The Cabinet Committee of Economic Affairs (CCEA) in its meeting held on 12th April, 2012, approved a Turnaround Plan (TAP)/ Financial Restructuring Plan (FRP) for operational and financial turnaround of Air India (AI) subject to achievement of certain laid down milestones by AI. As part of the TAP/FRP, AI has initiated, inter-alia, the following steps in order to cut costs:-

(i) Rationalization of certain loss making routes.

(ii) Induction of brand new aircraft on several domestic and international routes to increase passenger appeal.

(iii) Phasing out and grounding of old fleet.

(iv) Establishment of Integrated Operations Control Centre (IOCC) and Hub Control Centre (HCC) in Delhi.

(v) Freezing of employment in non-operational areas.

(vi) Operationalization of Subsidiary Companies such as Air India Air Transport Services Limited (AIATSL) and Air India Engineering Services Limited (AIESL) and transfer of manpower and equipment and treating them as Independent Profit Centers and,

(vii) Induction of the B787 aircraft on the Medium Capacity Long Haul Routes.

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