India ATF tax reductions take shape, while Embraer has a headache and Tony Fernandes sets about giving ANA one too!

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By TESTCustomwebLP TESTCustomwebLP June 27, 2014 20:00

India ATF tax reductions take shape, while Embraer has a headache and Tony Fernandes sets about giving ANA one too!

The Uttar Pradesh state government, the most populous in India, is to offer incentives of 4% VAT on Aviation Turbine Fuel (ATF) on new city pairs it is opening up to the private sector if the take-off mass of the aircraft is less than 40,000 kilograms. In addition if the aircraft meet this weight limit there will be zero landing and parking fees due to the state government, plus the state government will also underwrite the purchase of 30% of the seats or six seats per flight, whichever is less. The policy will be in force for three years to start with. Applications by the operators can be made until July 10, 2014.

The Uttar Pradesh state government is to open its skies to private airlines with Lucknow-Allahabad-Lucknow, Lucknow-Agra-Lucknow, Lucknow-Varanasi-Lucknow, Lucknow-Meerut-Lucknow, and Lucknow-Gorakhapr-Lucknow slots coming to market. Other city pairs indicated to be coming to market are Moradabad, Chitrakoot and Kushinagar. These are all significant business tourist and pilgrimage destinations.

This announcement will be of interest to ATR as its larger turboprops will fall within the weight limits set as will of course the Q400 from Bombardier. Also falling within these weight limits are the E170 and E175 aircraft, some MRJ types and at a push the Sukhoi SuperJet 100. So, these city pairs, if taken-up under this deal, will have to operate ATR or Bombardier turboprops for the very best economics, and very good indeed they would be too.

However this is not the ATF tax reduction that we were looking for that really needs to include the 737 and A320 aircraft, however the start point for turboprops has now been set at 4% and that gives good hope that any sliding scale will put the A320 and 737 fleets in a sub-10% fuel tax bracket that would make a world of difference.

The brave among you may wish to gamble on investing in some Indian operators right now.

Meanwhile: E190 operators are rushing to check aircraft following the alert service bulletin regarding faulty bolts that hold the engines in place following the discovery by Virgin Australia during heavy checks this week that nine of their seventeen aircraft were affected. Thoughts are now turning to other Embraer aircraft types?

In Japan, online retailer Rakuten, which is huge in the travel market, says it plans to buy a major stake in the new AirAsia Japan venture. You know, this might just work out. The AirAsia/ANA LCC in Japan completely failed while Skymark is not doing too well. The Japanese market is intense with possibilities for airlines looking in from the outside but it is very conservative by nature and this is a road block to many LCCs looking to break-in.

However if AirAsia were to move back into the market with the pulling power of Rakuten filling its seats and more importantly, selling goods on the AirAsia website and onboard, then this is a venture that has serious legs and should work well. Tony Fernandes will announce the deal on July 1st in Tokyo with the new carrier based at Chubu airport in central Japan costs are set to be low – Watchout Vanilla.

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By TESTCustomwebLP TESTCustomwebLP June 27, 2014 20:00
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