India may offer relief to loss-hit domestic airlines: report
04 September 2018
The government is working on a relief package for India’s battered airline industry that is struggling under the weight of heavy fuel costs and static air fares. Airlines are finding it difficult to recover from past losses in the world’s fastest-growing aviation market amidst intense competition and high fuel costs.
After two of the country’s oldest and biggest carriers, Jet Airways and state-owned Air India, reporting heavy losses, an aviation consultancy forecasts will lose up to $1.9 billion this financial year, mainly from rising costs and low fares.
A Reuters report quoting Rajiv Nayan Choubey, secretary to the civil aviation department, said help to cut airline costs was on the way, but without giving details of the measures planned.
He was speaking on the sidelines of the International Aviation Summit in New Delhi.
Meanwhile, consulting firm CAPA India in a report on Monday said the challenges for the airlines include high fuel taxes and a goods and services tax on maintenance operations that makes domestic work uncompetitive.
It forecast an industry loss of up to $1.9 billion in the financial year ending 31 March, up from a January estimate of a loss of $430 million to $460 million, the difference fuelled largely by a weakening rupee and a rise in oil prices.
CAPA estimated that India’s airlines, including Air India, need an additional $3 billion of capital in the near term to shore up balance sheets.
Choubey on Tuesday said the government would offer Air India state-guaranteed borrowing worth Rs2,100 crore, along with an equity infusion of Rs860 crore.
“If we do not support Air India, there may be a value erosion,” NewsRise quoted Choubey as saying.
The government has so far been unable to attract bidders for sale of a 76 per cent stake in the airline.
Airlines in India have ordered hundreds of new aircraft – both from Airbus and Boeing Co – even as the struggle to stay profitable.
Airlines are flying at near full capacity, filling nearly 90 per cent of seats and the number of domestic passengers have more than doubled over the past four years, mainly because of cheap fares.
Indian carriers offer one of the world’s cheapest airfares and unless this situation improves and fares become remunerative to airlines, losses will continue to haunt domestic carriers.
“While it is easy to find Indian passengers who want to fly, it’s very difficult for airlines to make money,” said Alexandre de Juniac, director general of the International Air Transport Association.