Rising jet fuel prices may sink weaker carriers

Bangalore: The financially weaker airlines of the Indian aviation industry unable to cope with tough market conditions will go under, possibly leading to government intervention to prevent the creation of a monopolistic situation, a senior official at consultancy firm Ernst & Young said.
Indian airline companies have been hit hard by the rising cost of jet fuel, which has resulted in slower growth in passenger and cargo traffic. Air-traffic growth slowed to single digits (5.1%) for the first time in five years during April-June 2008, according to E&Y’s latest report on the Indian aviation sector.
E&Y’s ‘The tough will get going’ report says aviation turbine fuel (ATF) accounts for nearly half of operating costs for airlines in the country, the highest in Asia.
During April-August 2008, ATF prices in India’s four metros shot up by more than two-thirds year-on-year, compared to a rise of about 6% for corresponding period in 2007.
“The entire business environment is affecting the aviation sector. The volatility in crude oil price has had the maximum impact. ATF pricing (in India) is also 50-60% higher than global pricing. Industry is also pleading to rationalise sales tax, which is now 4-30%,” E&Y associate director Asha Katyal said.
26/09/08 Swagata Gupta/Economic Times

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Categories: Indian Aviation- In General Sep 2008