TNN
 
Hydeabad, Oct 16: The aviation industry is in crisis. Aviation minister Praful Patel called it the "worst ever" in an interview with TOI, and called for a bailout for the industry's survival. But not everyone in government, including Finance Minister P Chidambaram and Petroleum Minister Murli Deora, are on the same page as Patel on providing a bailout.

Patel said, "I am very disappointed with some central ministries and state governments for not lowering tax rates and jet fuel prices. Tomorrow if planes stop flying, who will be responsible?" Reacting to Patel, Deora told TOI, "I am disappointed and hurt (by Patel)."

Deora added, "When I came to know about the letter from the oil companies (cutting back on extended credit to airlines) I told the oil companies that we must find a way to give them credit."

He said he had organised a meeting between Indian Oil chairman Sarthak Behuria and Jet's Naresh Goyal to find a way out. He said oil companies, too, were going through a bad time. Still, he would urge them to "help private airlines."

On his part, Patel acknowledged that it wasn't possible for the government to "write out cheques to private companies", so a concession package has to be worked out. He said the package would be ready in a month's time — a wait that many airlines feel is a very long wait.

The industry has been wobbly for about four months now, ever since fuel prices started to rise. This made airlines hike fares which, in turn, has affected passenger traffic and the bottomline of companies.

This wobbliness has turned into a tailspin now with oil companies cutting back on credit and with the liquidity crunch making banks shy of giving credit.

Jet Airways and Kingfisher have been "forced" to shed staff to keep afloat. It's said that with banks hesitating to lend money to bleeding airlines, it might be difficult for airlines can even meet their working capital requirements.

The situation is serious enough for Praful Patel to meet the finance minister and bankers and try and work out a lifeline for airlines.

"Banks are not happy to lend money to airlines. I will ask banks not to put undue pressure on them," Patel said at the air show here on Wednesday. This fact was echoed by Kingfisher chief Vijay Mallya who also said "banks are nervous" to lend money.

In this backdrop, Jet and Kingfisher took the unexpected step of forging an operational alliance to stick together and try to ride out the storm. Patel said he was alright with the alliance so long it was all within the four corners of the law.

The government carrier, Air India, privately calls the alliance a "cartel" and the buzz was loud enough for the minister to respond to it. "There is no monopoly. Air India is a formidable airline that can meet the challenge," he said.

Giving the details of their alliance, Mallya said: "We will not compete by having flights within half an hour of each other. Jet has a European hub in Brussels and Kingfisher does not want to have a second hub there. The Bangalore-London flight (his sole international flight) will continue but if need be, we will have code share with Jet. We are reviewing our international plans as we can code share now. I feel the entire saving could be to tune of Rs 1,500 crore annually."

Goyal said that Jet and Kingfisher flying on same route with a 40% load factor (as passenger growth has dropped) does not make sense. "Instead of having duplicate flights, it's better either of us flies with 80% load. There is still 30% excess capacity in domestic sector and fares are 30% below costs," Goyal said. On the international sector also, he said that foreign airlines were dumping prices in India.