Domestic airlines' costs may dip on weak dollar

Mumbai: Domestic airlines’ operational costs could drop by as much as 8%, if the dollar continues to depreciate against the rupee. Almost a third of their operational expenses are denominated in dollars. On Monday, the rupee gained to close at 47.9 against the dollar, which was nearly 3.2% higher making it the biggest single-day gain in 11 years.
It is now expected that domestic carriers, such as Jet Airways, Kingfisher Airlines, Air India, SpiceJet and Paramount Airways, will cough up a lot less now, which could reduce the time required to reach breakeven. Among the payments made in dollars, include rentals of leased aircraft, maintenance, spare parts and salary paid out to foreign crew. “The lease payments and engineering costs are tied to the dollar. If the currency situation continues this way for a month, achieving our breakeven target will be faster,” said a senior Air India official.
Airlines pay a monthly lease rental of around Rs 50 lakh for a single aircraft, which could drop to Rs 40 lakh with the depreciating dollar. Other costs like parking fees, navigation charges and employee costs would be less going forward, if the rupee holds out against the dollar.
Mark Martin, analyst at research firm KPMG told ET: “A weaker dollar will bring down airlines’ operating costs by around 8% helping the process of attaining breakeven quickly.”
20/05/09 Mithun Roy/Economic Times

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Categories: Indian Aviation- In General May 2009