Boeing expects Indian carriers to break even soon
14 August 2015
American aircraft maker Boeing Corp today expressed the hope that domestic airlines, which have been bleeding for many years now, are moving closer to break-even as operating costs have fallen faster than fare reductions following the sharp dip in oil prices.
"I believe that Indian airlines are moving closer to profitability after years of losses. SpiceJet has declared profits in the June quarter after many years of losses. I hope Jet Airways also reports some good numbers tomorrow (Friday). IndiGo has been in profit for many years," Boeing senior vice-president for sales in Asia-Pacific &India (commercial airplanes) Dinesh A Keskar told reporters in New Delhi.
Boeing's main customers in the country include Air India, Jet Airways and Spicejet which also have Airbus planes, while the largest private carrier Indigo has only Airbus aircraft.
Others like GoAir have a mix of planes from both the planemakers. New airline Vistara also flies Airbus as Boeing could not meet its demand on a short notice, according to Keskar.
Citing a study carried out by Boeing, Keskar said the difference between the average fare and the average break-even fare for a Mumbai-Delhi flight was at Rs1,221 in May 2014 but this has come down to just Rs395 by May 2015 - a nearly 68 per cent reduction in losses.
The reason behind this sharp fall is a 24-per cent decline in total operating costs while average fares have fallen by just 13 per cent, he explained, and argued that operating costs could have come down further but for the high level of taxes imposed on jet fuel, which varies from 4 per cent to 32 per cent in some states like Maharashtra.
He also said a stable rupee will help further cost reductions, even though the comment ironically came on a day when the rupee sniffed at 65 to the dollar, which is two-year low. But to be fair, the rupee has been fairly stable all these years after the run on began in mid-May 2013 when the US Fed's taper lift-off began and is still one of the best performing major currencies.
Releasing the study in Mumbai, Boeing said while local airlines are continuing to lose money, break-even is within sight in the domestic market.
"Fuel prices have now come down by 33 percent from their October 2013 peak, but yet the domestic airlines pay up to 50-60 percent more for fuel than the airlines in the US," said Keskar.