'AI disinvestment not hit by attacks on U.S.'

By Our Special Correspondent

NEW DELHI, NOV. 26. The terrorist attacks in the U.S. on September 11 were not likely to have any adverse impact on the disinvestment of Air India in the long term, the Union Minister for Civil Aviation, Mr. Shahnawaz Hussain, said in a statement in reply to a starred question in Parliament.

He said although it was true that the aviation market was down now, Air India has its inherent strengths and therefore, the tragic events of September 11 will not impact the disinvestment process.

In the short term, airlines including Air India have reduced capacity to match the reduced demand, he said. There have been large scale cancellation of travel plans by tourists and business travellers from the U.S. and Western Europe leading to decline in traffic post-September.

Due to declining international traffic, United Airlines has discontinued operation from India, North-West Airlines has discontinued its operation to Delhi, Gulf Air has withdrawn three frequencies between Bahrain and Mumbai, Swiss Air has withdrawn its operations, Canada 3000 has deferred its plan for operation and Air India has curtailed flights to U.K./U.S., Japan, Singapore, Hong Kong and Muscat.

The national carrier was forced to cancel its flights from the U.S. due to closure of air space for four days resulting in a loss of Rs. 8.5 to Rs. 10 crores.

Mr. Hussain said the Government had provided indemnity to the tune of $ 500 million to Air India which was equal to the shortfall in the third party insurance cover required.

This cover which was valid till October 12, 2001, has been extended by the Government till November 30, 2001.

Even though no comprehensive study had been made so far to assess the overall impact of the terrorist attacks on the aviation cities, the International Air Transport Association has estimated the loss to be $ 7 billion (about Rs. 35,000 crores) on international services worldwide.

There has been a severe crisis of confidence in air travel among consumers. This has led to reduction of about 17 per cent in passenger traffic in September itself compared to the same month previous year. The passenger load factor fell from 78 per cent in August to 69 per cent in August.

IATA has also estimated that member airlines had laid off 1,20,000 employees (seven per cent of the total staff). Additionally aircraft manufacturers have announced lay-off of nearly 56,000 employees. They have also resorted to capacity cuts between 10 per cent to 20 per cent on different sectors.

Insurance companies have also limited third-party liability cover in respect of war, terrorist and other allied activities to $ 1 billion and imposed additional war insurance charge at the rate of $ 1.25 per passenger.

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