There are lessons to be learnt from the current state of telecom sector and the learning need to be implemented to improve the health of domestic airlines, Ajay Singh, the chairman and managing director of SpiceJet, has said.
Singh was drawing parallels between the two sectors, which have been struggling to create profit-making going concerns.
"There is a struggling public sector unit in both sectors which the government is supporting ... the system is heavy on regulations and high on taxes ... and the largest player has a substantial share of the market," Singh said.
Singh was alluding to
state-owned telecom firms MTNL and BSNL, and the national carrier Air India. The Union government is attempting to revive all three struggling entities.
The inclusion of aviation turbine fuel under the goods and services tax regime may result in revenue loss of around Rs 5,000-Rs 5,500 crore but simultaneously, it is also subsidising Air India with around Rs 6,000 crore every year, Singh said.
>> SpiceJet to set up JV airline at Ras Al Khaimah with 49% share; eyes East Europe
"We need to take steps regarding high taxes. In domestic space, fuel is 35 percent more expensive than other parts of the world," Singh added.
A high-cost atmosphere affects the financial health of an airline and thus, has prevented the existence of strong aviation players in the country.
"Wide body operation is a high-cost high-risk operation ... people do this when they are financially strong ... foreign carriers take away this traffic as domestic airlines are weak ... maintenance, repair activities invite GST [goods and services tax] of 18 percent. We need to think strongly about tax rationalisation," Singh reiterated.
"The government is aware of these issues ... hope steps are taken to support aviation sector."
Commenting on the scenario of low yields in a peak season environment, Singh said that it is for the largest player to determine fares and not the other way around.
"Fares are determined by the largest players, large players don't follow small ones. Also, market looks inverted and this fare inversion is dangerous where spot fares fall," Singh said. IndiGo, the largest player in Indian aviation space with over 47 percent market share, also complained of "unusual" low fares in a busy season.
>> SpiceJet, JetBlue promote each other on Twitter without formal arrangement
Vodafone Idea and Bharti Airtel, the two major telecom operators, reported a cumulative loss of around Rs 74,000 crore for the September quarter, largely on account of provisions towards adjusted gross revenue (AGR) dues arising out of a recent Supreme Court order.
Vodafone Idea posted a record quarterly loss of Rs 50,921 crore, Airtel reported a loss of Rs 23,045 crore in the July-September quarter.
As far as financial performance of domestic airlines is concerned, Indian carriers posted a cumulative operating loss of Rs 6,846 crore, according to the provisional government data for 2018-19 (April-March).
National carrier Air India and its subsidiaries, Air India Express and Alliance Air, posted a combined operating loss of Rs 4,534 crore in 2018-19.
Four airlines—Jet Airways, Jet Lite, Air Costa, and Air Carnival—have shut operations in the last four years. Jet Airways was the second-largest domestic player and the largest international player in the Indian aviation space before While Air India continues to struggle with a debt burden of around Rs 60,000 crore and is getting ready for divestment, state-run telecom companies BSNL and MTNL were granted a revival package of Rs 74,000 crore in October.
its demise in April this year.