More turbulence ahead for country's airlines

India's domestic air passenger traffic growth has come on the back of fiercely competitive pricing among Indian airlines to ensure tickets remain affordable. This has whittled revenue, a double whammy for the airlines at a time of rising operating costs because of increasing fuel costs and a depreciating rupee that has hit an all-time low of more than 72 rupees against the US dollar.

Aircraft fuel expenses have jumped more than 44 per cent from last year, in a country where aviation fuel is among the costliest in Asia because of high taxes.

A report on the Indian aviation industry released last month by the International Air Transport Association said Indian airlines have yet to match the financial improvements recorded by the global airline industry in the past three years. "This remains a work in progress for the industry and its key stakeholders, including policymakers," it added.

There are concerns that there could be more turbulence ahead. Indian airlines are expected to post combined losses of up to US$1.9 billion (S$2.6 billion) in 2018-19, said aviation consulting firm Capa India.

Expressing concern over the sector slipping into a worsening financial situation, Mr D. S. Rawat, the secretary-general of the Associated Chambers of Commerce and Industry of India, last month called for support by way of reduced taxation on the aviation turbine fuel and a host of other levies by the federal and state governments.

Air India, saddled with debts of more than 480 billion rupees (S$9.2 billion), has failed to entice buyers. Jet Airways, another full-service airline, has reported losses of more than 13 billion rupees for the April-June quarter, its second consecutive losing quarter.

Even IndiGo, an Indian budget airline that has bucked the trend by posting profits in recent years, reported its lowest quarterly profit in three years in July, with earnings down 97 per cent due to rising fuel costs and foreign exchange losses.

Debarshi Dasgupta

A version of this article appeared in the print edition of The Straits Times on September 17, 2018, with the headline 'More turbulence ahead for country's airlines'. Print Edition | Subscribe