Traffic fall adds to the cash woes of airlines

Mumbai/ Bangalore: Falling domestic air passenger traffic is hitting the cash flows of airlines, making it difficult for them to meet their working capital requirements.
Not so long ago, domestic carriers were able to mobilise close to 30-40% of the total working capital from advance sale of tickets. Today, with travellers being resistant to flying, airlines are able to raise only 15-20% cash from advance sales.
Such a low upfront revenue accrual is making airlines jittery. This is one of the reasons they are coming out with attractive schemes for passengers to get them onboard early."Till the last quarter of 2007-08, the cash flow from advance sale was substantial. This made us comfortable but that has come down significantly today. Falling demand for air travel has affected our ability to raise enough passenger revenues to meet a large part of our working capital need," said a senior executive of a budget airline.
The executive said that despite drop in the aviation turbine fuel (ATF) prices and other operational costs over the last few months, operating an A320 or a Boeing 737-800 for 180-200 flights can cost anywhere between Rs 10 crore and Rs 12 crore per month. This means that airline with a fleet of 20 aircraft need to raise around Rs 200-250 crore from their operations to meet their working capital needs.
An aviation analyst said airlines were trying to strike a balance between yield and revenues by introducing and withdrawing promotional offers.
08/04/09 Archana Shukla & Praveena Sharma/Daily News & Analysis

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Categories: Indian Aviation- In General Apr 2009