Mangaluru, Aug 12: Aviation, the sector which was showing an immense promise till about a year ago, is facing head winds with most of the airlines battling a survival issue, hit by rising fuel costs and other expenses, even as cut-throat competition is making aviation firms bleed, Assocham has said.
Expressing concern over the sector slipping into a worsening financial situation, week on week, Assocham said airlines need hand-holding across the board, irrespective of their status- whether in the private or public sector.
“While the government is injecting funds into Air India, private sector airlines can be given support by way of reduced taxation on aviation turbine fuel and a host of other levies by the Centre and state governments,” Assocham secretary general D S Rawat said in a statement. “It is a highly employment-oriented sector, which needs to be protected”.
Aviation firms which were commanding a fair valuation in the stock market till about a year ago, are witnessing a depletion of interest among investors, resulting in a massive erosion, between 15 and 40 per cent in their market capitalisation. “This has resulted in the inability of the operators to raise any fresh resources either through equity or even debt routes. While equity is not commanding much of valuation, debt is becoming even more expensive,” he said.
If the sector does not improve as a whole, it would be a long haul before Air India could be nursed back to health and put on offer for privatisation. “Even the schemes like UDAN, which are good innovative services for making air travel affordable, would be impacted by the deteriorating health of the sector,” the chamber said.