Stocks of airline companies climbed up on Monday on news that the civil aviation ministry has sought relief in sales tax that is charged from the airlines on the aviation turbine fuel (ATF) sales and has also pushed for doing away with the service tax charged from airline companies but passed on to consumers.
Flight SchoolThe view is that these measures will help ease the financial burden that airlines in India are subjected to and help airline cut losses due to higher taxation on air turbine fuel.
Aviation CollegesAviation analysts say that if the move comes through and the ministry succeeds in pushing for getting ATF a declared goods status with a uniform four percent tax (as compared to a fluctuation four to 28% tax) the entire DNA of the aviation sector will undergo a change. "The ATF costs for airline companies have gone up by 50%-51% of their top line in the recent past. If ATF is brought under the declared goods category then airline companies can look at a savings of at least 15% to 20% on the tax side alone and an impact of eight to nine percent EBITDAR positive," said Rashesh Shah of ICICI Securities who tracks airline stocks. What can work even more in favour of airline companies is the fact that the news comes after the prices of crude oil have eased a bit and are below a $100 per barrel mark after long. "If fuel prices slide sustains and stabilizes at this level then the sector's DNA will change," Shah said.
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