Airlines get tailwind from a firm Re

Mumbai/Bangalore: Looks like good times have taken off for airlines. After the easing of jet fuel prices, a stronger rupee against the dollar is expected to further bring down their operational cost.
Close to 30% of an airline's operating costs are denominated in US dollar. The value of rupee against the dollar has climbed by around 6% in the last three months to Rs46 from Rs49.
M Thiagarajan, managing director of Paramount Airways, said a firmer Indian currency translates into lower costs for airlines as they have to shell out less for lease rentals, global distribution system (GDS) for ticket reservation, aircraft spare parts, salaries of expat pilots and other costs borne in dollars.
A GoAir senior executive, who did not want to be named, expects ATF prices to fall 6-7% due to slipping crude oil and a rising rupee.
An analyst with a local broking house said the fall in US dollar will see air carrier's liabilities on leased aircraft taken on foreign exchange (forex) - US dollar - loans dip.
An executive from another budget airline estimated that 6% increase in rupee value will cut their operational cost by around 2%.
But dip in operational cost is not likely to result in lower fares.Paramount's Thiagarajan said most airlines will use this opportunity to trim their losses.
According to airline consultancy firm Centre for Asia Pacific Aviation (CAPA), the airline industry lost around Rs9,000 crore ($2 billion) in 2008-09.
Airlines have been struggling with low yields, net revenue per seat and excess capacity in the market that had resulted in intense fare war.
15/10/09 Ramiya Bhas & Praveena Sharma/Daily News & Analysis

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Categories: Indian Aviation- In General Oct 2009