Advertisement

HindustanTimes Mon,29 Dec 2014

Brace yourself for record high airfares this Diwali

Tushar Srivastava , Hindustan Times  new delhi, August 25, 2013
First Published: 21:24 IST(25/8/2013) | Last Updated: 03:37 IST(26/8/2013)

The falling rupee has caused another casualty — your air tickets.

Advertisement

With over 70% of the costs of airlines in India being dollar-denominated, industry experts said domestic carriers are feeling the heat like never before as the rupee continues to plummet to new lows against the dollar.

Indian carriers lost an estimated Rs. 10,000 crore in 2011-12 on the back of a Rs. 19,000-crore loss over the previous three years, according to industry analysts. Domestic airlines’ debt burden is likely to soon reach $20 billion.

Airfares are likely to touch a lifetime high this Diwali, said Keyur Joshi, co-founder of makemytrip.com. “I am sure fares will go up. Compared to last year, fares will be as much as 15-20% higher. I hope they are, otherwise how will airline make up for all the expenses?

Airlines’ dollar-denominated costs include expat staff salaries, aviation turbine fuel (ATF) or jet fuel, lease rentals, maintenances, aircraft loans, interest repayments etc.

“Rupee depreciation impacts very seriously as over 70% costs are in US dollars,” said Kapil Kaul, chief executive officer, South Asia, aviation consultancy firm Centre for Asia Pacific Aviation (Capa). According to Capa Research estimates, second-quarter losses for airlines are likely to be $400-450 million.

“Costs are at peak and ATF, currently alone is over 60% of the revenue. Fares could reflect cost from third quarter but carriers’ pricing strategy, mostly, defies logic,” said Kaul.

“I continue to believe that till Jet Airways and Air India restructure their domestic model in line with market realities, domestic airline industry will remain fundamentally unviable,” he said.

“High-cost structure marked with low fares (to match low cost carriers) is not sustainable even if you have government funds and support of strategic investors,” Kaul added.

With the dollar appreciating against the  rupee, domestic carriers will have to cough up a lot more and operating costs will shoot up.

As the rupee continues with its free fall against the dollar, foreign investors may think twice before investing in India’s aviation sector.


Advertisement
more from Aviation

Airbus A350 'performing extremely well' in flight: pilot

The first test flight of Airbus's next-generation A350 plane was going smoothly and the aircraft was "performing extremely well", its pilot said today, two hours after take-off.
markets
Advertisement
Most Popular
Advertisement
Advertisement
Copyright © 2014 HT Media Limited. All Rights Reserved