July 31: Private airlines today threatened to suspend all domestic flights on August 18 in protest against the government’s apparent indifference to their year-long demand for a cut in taxes on aviation fuel and airport charges.

This is the first time private airlines plan to suspend operations nationwide since they started flights in 1992. At least one airline owner, the luxury yacht-owning Vijay Mallya who is also the master of a liquor empire, has threatened indefinite suspension, which has the same effect as a strike but is not called so.

The action is being orchestrated by the Federation of Indian Airlines (FIA), an industry body that represents nine airlines. Publicly owned Air India is also a member but it will not suspend flights on that day. Paramount Airways that operates mainly in the south is unlikely to join the action.

FIA secretary-general Anil Baijal, a former bureaucrat and a former boss of Indian Airlines, said the suspension was not a strike. It was designed to focus attention on the mounting problems of an industry weighed down by losses of over Rs 10,000 crore in the year to March 2009.

The airlines said that all those who had booked tickets on that day would get refunds.

“I don’t want to say that this is a strike but we want the government to know what the consequences would be if private airlines do not exist. So, we decided to suspend services for a day on August 18,” said Mallya, chairman of Kingfisher Airlines, which reported losses of over Rs 1,600 crore in the year ended March 31, 2009.

“If the industry has to sustain itself, we need to be in business. But all of us are bleeding, whether it is the private or the public sector. All of us need help,” said Naresh Goyal, chairman of Jet Airways.

“Our chairman was not there when the decision was taken,” said Jitendra Bhargava, Air India’s director communications. “It’s important to recall who started offering these low fares in the first place. You will reap what you sow.”

The government was clearly caught off balance by the private airlines’ threat to suspend flights. “The government understands the problems faced by the aviation sector. But it doesn’t support any move that will inconvenience the travelling public,” civil aviation minister Praful Patel said.

Finance minister Pranab Mukherjee said: “I will speak to Praful (Patel) on the issue.”

The beef is over the value-added tax (VAT) slapped on aviation fuel. It varies from 4 per cent in Andhra Pradesh to as high as 29 per cent in Tamil Nadu and Bihar.

The airlines are most upset over the fact that Maharashtra charges 25 per cent VAT in Mumbai and Pune airports but 4 per cent in other parts of the state. Mumbai is the country’s busiest airport and the levy hurts airline operations. Bengal also levies 25 per cent VAT.

“Tax on aviation fuel is a state subject,” said Patel. “We have been requesting them for years to trim the rates but with little success.”

The airlines want the Centre to exercise its prerogative and declare aviation fuel as a “declared good”, which would then immediately become eligible for a uniform 4 per cent tax across the country.

“We are not looking for a bailout; and we are certainly not looking for charity,” Mallya later told a television channel. “All that we are asking for is lower taxes on fuel to bring the costs at par with international rates. We can take care of the rest.”

The government has already allowed the airlines to pay jet fuel dues of over Rs 2,900 crore in six interest-free instalments, which many interpreted as a bailout.

The airline honchos said they wanted the government to stop the airport developers in Delhi, Mumbai, Bangalore and Hyderabad from charging what, according to them, were astronomical fees to use their facilities.

“Domestic carriers are in a bad shape. Even if an airline flies with an 80 per cent load factor, it won’t make money as the fares are too low,” said Jayesh Gandhi, national director (infrastructure) at Ernst and Young.

Mallya and Goyal, however, will be disappointed to learn that the CPM, which knows a thing or two about strikes, is not supporting them. Party leader Sitaram Yechury opposed government help for airlines.