Oil price hike:Rs 100 bn burden on Indian Airlines

The steep rise in international oil prices in first half of 2008 had put Rs 10,000 crore (Rs 100 billion) burden on Indian Airlines by way of additional outgo on fuel bill, the Rajya Sabha was informed on Tuesday.

Replying to questions on losses to Air India, civil aviation minister Praful Patel said the rally in international crude oil prices that touched $147 a barrel in July 2008, hit Indian carriers by Rs 10,000 crore (Rs 100 billion) in jet fuel bill.

Besides, the economic slowdown and the 26/11 Mumbai terror attacks saw a severe drop in air traffic, he said.

Air India loses are a result of high jet fuel prices and fall in air traffic following global economic slowdown, he said. "There are (also) systematic issues which need to be corrected."

The National Aviation Company of India Limited, which was formed after the merger of Air India and Indian Airlines, reported a loss of Rs 2,226 crore (Rs 22.26 billion) in 2007-08 and is estimated to incur a loss of around Rs 5,000 crore (Rs 50 billion) during 2008-09, he said.

Air India, he said, will need to cut cost and rationalise operations. "We are formulating a new plan for revival."

The merger of Air India and Indian Airlines was conceived to reduce cost and streamline operations. While lot of synergies have been accrued, full benefits have not accrued due to delay in integration of IT systems of the two companies, he said.

Delay in IT integration has also put off Air India's entry into the Star Alliance, the global club of premier air carriers, he said adding the Air India management has been strongly advised to resolve the issue in a timebound manner.