Domestic airlines in India are likely to report a loss of Rs 3,500 crore in the first six months of this financial year. The situation is so grave that some may default in servicing their debt, forcing their closure.

The warning came in a letter sent last week by the Federation of Indian Airlines (FIA), a body representing Indian carriers to the secretary, ministry of civil aviation as per a report in TOI by Manju V.

Urging the government to take 'immediate, effective and comprehensive measures' to protect the health of the airline industry in the country, the October 18 letter sent by FIA secretary general Anil Baijal said that besides rationalising ATF and other taxes and levies, it is critical to establish appropriate regulatory mechanism that would prevent malpractices like predatory pricing and capacity dumping in the market. "Indian carriers operate at cost levels that are probably the highest in the world," the FIA letter said adding that Aviation Turbine Fuel for domestic consumption is 50% higher than the global prices. 

Despite all this, fares in India have been the lowest in the world when compared to other mature countries, it argued. "Domestic fares in India are currently as low as one-third of what airlines charge in other countries over similar distances," said the FIA letter furnishing a comparison of fares in different countries.

Aviation analysts though pointed out that the FIA fare comparison chart cheats by putting up a distorted picture. "To begin with, an international comparison of airfares across countries should be done only after adjusting for Purchasing Power Parity. A linear comparison across different currencies as done by FIA is very misleading," said an aviation analyst, requesting anonymity.

"Then there are other heads, like labour costs, for instance, which are much low in India as compared to these countries mentioned," he added. But the biggest trick lies in the fact that the comparison takes into account only geographical distance. Airfares depend more on demand-supply than on geographical distance. "It is not known which routes have been taken to represent these distances. That leaves a lot of room for manipulation," said another analyst.