Airline baggage rate hike will cripple courier services: EICI

Our Corporate Bureau
18 June 2003

New Delhi: Leading express and courier companies came together on a common platform to deplore the sudden decision of the domestic airlines to steeply increase the baggage rates for onboard couriers by nearly 60 per cent. This was stated at a press briefing in New Delhi addressed by senior office bearers of Express Industry Council of India (EICI) today.

EICI is the apex organisation representing courier companies operating in India. The courier business in India is a high-growth industry, slated to be about Rs 50 billion in revenues by 2004-2005. It plays a vital service role for trade and industry in general, by providing time-definite, door-to-door delivery of letters, parcels and commercial consignments, a critical need of modern businesses. The recent hike (effective 16 June 2003) in baggage charges for OBC by the domestic airlines has delivered a body blow to this vital service industry and left the players reeling.

Speaking on behalf of EICI, Sandip Shah, past chairman (and managing director, Elbee Services), said: "The steep increase of 60 per cent coming soon after an increase effected in January 2003, in the aftermath of the Gulf War, will cripple the industry. It will be difficult to pass these increases on to the consumers as most organisations are seeking to drive down costs, and maybe forced to switch to alternate modes, even if these are inefficient."

The reasons advanced by the airlines for the rate hike are the falling passenger traffic due to SARS, increase in price of aviation turbine fuel and the losses incurred by the airlines. Countering these arguments, Shah said: "These reasons are simply not acceptable. Decrease in passenger traffic cannot be a justification for hiking OBC baggage rates. As for ATF prices, these have actually fallen in the last two months. They had risen marginally during the Gulf War, at which time the airlines had increased the baggage rates by 7 per cent."

Expressing the council's view he added: "The airlines are making losses due to the recently introduced APEX fare structures. The courier industry should not be made to subsidise the losses made on the passenger side."

The courier industry, which employs over 1,00,000 people, has already been adversely affected by the baggage rate increase imposed in January 2003, and the increase in service tax from 5 per cent to 8 per cent. Industry sources claim that these cost increases were absorbed by the industry by increasing efficiency levels and reducing operating margins. Now, there is no buffer available with the industry and it will be forced to pass on the unreasonable hike to the users.