Mumbai, June 6:
The 25 per cent
rupee depreciation and the 40 per cent hike in crude oil prices over the past
year have exerted pressure on the profitability of airline companies in the
country.
Fuel costs
account for 45-50 per cent of operating costs.
Operational
costs
“The primary
reason for the losses is on account of a large share of expenses (almost 60-70
per cent) of the carriers being accounted for in dollars.
As a result,
fuel and operating cost have increased at a fast pace,” Mr Ajay D'souza,
Director, CRISIL Research, said.
He added,
“Around 30-35 per cent of a carrier's operating costs are denominated in
dollar.
The rupee
depreciation against the dollar has pushed up the operational cost for
carriers.
A weaker Indian
currency translates into higher costs for the carriers as they have to pay more
towards lease rentals, ticket reservation using the global distribution system
(GDS), aircraft spare parts, salaries of expatriate pilots, higher interest
cost on foreign currency debt and other costs borne in dollars.”
Ticket prices
On the other
hand, only a handful of them earn revenue from international operations,
thereby, providing them a natural hedge.
However, even
for these players, stiff competition has led to average ticket prices remaining
flat.
Cost increases
have not been passed on. For instance, losses for Jet Airways increased 140 per
cent in the fourth quarter of 2011-12 to Rs 298 crore.
Similarly,
SpiceJet reported over four-fold rise in net loss at Rs 249 crore during the
same quarter.
Two of the main
carriers (Air India and Kingfisher) have severely curtailed flights.
As a result of
the capacity crunch, air tickets prices have gone up.
“While average
ticket prices on the domestic routes have gone up, it has not been sufficient
to offset the steep increase in cost,” Mr D'souza said.
The hike in
ticket prices has led to domestic air passenger traffic growing at a mere 7 per
cent in January-March 2012 quarter.
This growth is
much lower than the 16 per cent growth recorded in the first nine months of
2011-12.
According to
the Centre for Asia Pacific Aviation (CAPA), Indian carriers made a combined
industry loss of $2.5 billion in the year to March 31.
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