India may be one of the fastest growing aviation markets in the world, but its aviation sector is going through an economic crisis.
Indian carriers made a loss of Rs. 10,983 crore in 2012-13. The current year is likely to be no better. "Both Jet and SpiceJet may be headed for large full-year losses for 2013-14 before accounting for one-off adjustments such as sale and leaseback and other non operating income and benefits," aviation consultancy firm Centre for Asia Pacific Aviation (Capa) said in a recent report.
The spiralling cost of aviation turbine fuel, economic slow-down, devaluation of the rupee, low returns, high operational costs and the consequent widening gap between revenue and expenditure are some of the factors that have contributed to the financial crisis of airline companies.
"The flawed perception that flying is the rich man’s preserve has resulted in the civil aviation sector bearing the burden of a high tax regime," aviation minister Ajit Singh had said last week.
Despite the huge losses, though, India remains an attractive investment destination for foreign airlines. Abu Dhabi’s Etihad Airways has picked a stake in Jet Airways while AirAsia and Singapore Airlines have applied for permission to launch domestic airlines. Emirates and Qatar Airways are said be keen to tie-up with an Indian carrier.
India is the ninth largest aviation market in the world, and is poised to be the third biggest by 2020. By that time, annual traffic at Indian airports is expected to reach 450 million. Some 90 million passengers are expected to pass through Delhi alone, every year. The international passenger traffic in and out of India in 2013 was 43 million — an increase of 5.5% over the previous year.
"Financial instability continues and the industry faces serious viability challenges. Investor interest is almost invisible and government policies approved recently continue to face on-ground challenges — including delays in AirAsia’s clearances," said Kapil Kaul, South Asia CEO of Capa.
Overall sentiment, Kaul said, had improved due to some game changing decisions especially FDI in airlines but "reality on ground reflects the reality of deeper pessimism".