Can Budget 2012 save our airlines?

The aviation sector is looking forward to the Union Budget 2012, scheduled for the 16th of March, as it seeks support from the government to help deal with its huge losses. Due to high debt and surging oil prices, Indian carriers have been struggling to stay afloat.

While Kingfisher in on the brink of closure, other airlines like Jet Airways are facing problems in making salary payments to their employees. According to media sources , Indian carriers are battling with a debt of around Rs 50,000 crore and are looking at the government to ease investment norms in the upcoming budget.

The current situation of the airline industry is not very optimistic with oil prices above $120 per barrel, any attempt by the industry to pass on the impact of higher cost in the form of increased fare will only impact traffic growth.

Here are some key events that could impact the sector -

•Aviation Turbine Fuel (declared good status) - airlines are eagerly awaiting the approval by the cabinet to directly import aviation turbine fuel. Currently, airlines pay huge taxes which varies from 4 percent to 33 percent across states. However, Kotak does not expect this to go through as it requires the approval from the state governments.

•Concessions - industry is also looking forward to a reduction in airport and related charges. However, even this seems unlikely as most of the key airports are under private ownerships.

•Infrastructure status - the sector is looking forward to getting an infrastructure status as this will help bring down borrowing costs.

•Allow foreign airlines to acquire at least 49 percent if not 74 percent in domestic airlines. This will provide the much needed cash that airlines require.