Strong Re may help airlines cut costs by 10% per month

Mumbai: Loss-laden Indian airlines industry is likely to save as much as 10% on operational costs a month if the rupee manages to stay around its current level against the dollar, the possibility of which looks bright, analysts say.
This possible saving may be a boon for the domestic carriers which suffered a combined loss of Rs 10,000 crore last year. Almost a third of an airline’s operational expenses are denominated in dollars. An airline pays a monthly lease rental of around Rs 50 lakh for an aircraft if the dollar is pegged around 42 rupees.
This drops to Rs 45 lakh at the current rupee-dollar valuation. Other costs such as parking fees, navigation charges and expats employee costs would be less if the rupee holds out against the dollar.
The rupee rose to a one-year high to 46.14 a dollar on October 15 on strong capital flows. It grew 0.24% in the past week and 5% this year. However, it’s still 12.8% above the record low of 52.2 per dollar in March this year.
Interestingly, strengthening of dollar also impacts the aviation turbine fuel (ATF) prices as oil marketing companies buy crude oil in dollar before selling it to domestic carries.
23/10/09 Mithun Roy/Economic Times

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Categories: Indian Aviation- In General Oct 2009