Business Daily from THE HINDU group of publications
Friday, Feb 15, 2008
ePaper | Mobile/PDA Version
Business Daily from THE HINDU group of publications Friday, Feb 15, 2008 ePaper | Mobile/PDA Version |
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Logistics
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Airlines ‘Excess capacity, main reason for aviation sector losses’
Mumbai, Feb. 14 The main reason for Indian aviation industry running into losses is not the high price of Aviation Turbine Fuel, say senior industry experts. In fact, it is the excess of capacity in the airline industry that is putting pressure on the airlines and the current fares are not covering costs, said Mr Saroj Dutta, Executive Director of Jet Airways. Speaking at South Asia Aviation Finance Conference in Mumbai, Mr Datta said, “In India we have been very free to increase fares with the rise in global ATF prices. So how far can we blame the rise in fuel prices to the plight of Indian carriers?” He added, “Mergers and consolidation have also brought no benefit to the industry as the rationalisation of capacity is not happening.” ‘Not sustainable’Agreeing with the argument, Mr Dinesh Keskar, Senior Vice President, (Sales) Boeing Commercial Airplanes, said that large number of wide-body aircraft would not be sustainable by the Indian aviation industry for serving domestic market. With the large capacity (through more airplanes) coming in, airlines are finding it difficult to reach a break even load factor, he said. He also added that bigger the aircraft the fuel burnt would be more leading to higher operating cost. However, not all players in the industry subscribe to the argument. According to Mr S. Venkat, Executive Director (Finance) of Air India, “Fuel surcharges (levied on customers) do not compensate for the high fuel prices because we take a beating on the basic fares to accommodate the fuel surcharge. “Unless and until fuel prices stabilise at $58 to $60 a barrel, we cannot think of profitability coming in.” According to industry estimates, aviation industry in India made a loss of $500 million in 2007. ATF constitutes around 35 to 40 per cent of the airlines’ operating cost. More Stories on : Airlines | Financial Performance
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