Crude price fears scuttle airlines’plans

Mumbai: As they head into the traditional lean season, and with crude prices threatening to rise again, all major airlines in India are either reworking or deferring their expansion and fund-raising plans.
Kingfisher Airlines Ltd, the country’s second biggest airline by passengers carried, has deferred its expansion and is reworking a plan to sell shares abroad to raise up to $300 million (Rs. 1,340 crore), chairman Vijay Mallya said recently.
The cash-strapped airline had planned to issue global depository receipts earlier this year.
Low-fare carrier firms InterGlobe Aviation Pvt. Ltd (IndiGo) and Go Airlines India Pvt. Ltd (GoAir) have deferred plans to raise money by selling shares to the public.
The country’s second largest low-fare carrier SpiceJet Ltd hasn’t been able to raise money from the market for its expansion.
Meanwhile, Jet Airways (India) Ltd, the country’s largest airline by passengers carried, is currently valued at $800 million, which is around 60% lower than what it was valued at in 2005, when it listed on the bourses. The airline was a purely domestic one at that stage.
National airline Air India, in the midst of a turnaround, continues to delay salary payments and has now started defaulting on interest payments to banks.
There is a common thread to the problems and issues of most airlines—higher jet fuel prices.
With crude oil hovering around $114 to the barrel, the price of jet fuel has rocketed, taking a toll on profitability. Airlines are paying Rs. 57,166.96 per kilolitre of fuel from 1 June, 33.53% higher than the Rs. 42,808.92 they were paying last June.
09/06/11 P.R. Sanjai/Live Mint

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Categories: Indian Aviation- In General Jun 2011