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Travelling by air could become dearer from April. This is due to the withdrawal of exemption on withholding tax of 12-15 per cent on lease rentals. In the last few budgets, airlines augmenting their fleets were given exemptions from this tax, which comes to an end on March 31, 2007. "This will push up lease rentals by 10-12 per cent," said Mohan Kumar, consultant for low-fare airline Air Deccan.

The withholding tax will hurt airlines that plan to lease more planes in the next couple of years. Indigo, for instance, plans to induct eight planes this year and eight in 2009. "The withholding tax will hurt us as we have signed leases for only some of these planes," said Bruce Ashby, CEO of Indigo.

The tax will severely hurt the state-owned carriers Air-India and Indian, which are adding many planes. "This will significantly increase the fleet acquisition costs of Indian carriers, particularly in a market where demand for aircraft is greater than the supply. We hope that the provision can be included in the Finance bill," said V Thulasidas, CMD Air-India and chairman of the Federation of Indian Airlines.

Airlines, which had sought rationalisation of taxes on aviation turbine fuel, are sore about the government not doing enough about the sector. "Aviation is not in the government's radar. They probably still think it is peripheral and marginal, and not integral to the economy," said Air Deccan CEO GR Gopinath. "If you want to create jobs, you need to encourage the core sectors."

Some airlines like Paramount and Air Sahara, which flies Embaer jets and CRJ jets respectively, will benefit from the extension of 4 per cent aviation turbine fuel for smaller jets weighing less 40 tonnes. This was earlier available only for turbo-props aircraft (ATRs) flown by Air Deccan, Jet and Kingfisher. Sahara, which plans to buy 25 CRJ jets, hopes to save Rs 25-30 crore annually. Alliance Air, which is buying CRJ Bombardier jets, will also benefit from this.

The helicopter companies like Global Vectra and Deccan Aviation, which offer charter services, will be hurt by the 7.12 per cent effective customs duty on the import of helicopters. This will force them to increase charter rates to companies like ONGC who use their services. Even as the BSE Sensex recovered 0.82 per cent or 107 points from the 4 per cent fall on Wednesday, airline stocks continued to fall. Deccan Aviation was down 7.5 per cent while SpiceJet fell 3.75 per cent; Jet Airways, which fell 4 per cent on Wednesday, defied the trend, moved with Sensex.

Email author: ranju.sarkar@hindustantimes.com