New Delhi: Cash-strapped domestic airlines could see their margins eroding with the rupee weakening by 11% against the dollar since the beginning of August.
Indian carriers will take a hit of at least 6% in profitability as dollar-linked expenses, such as lease rentals, maintenance and expat salaries, would cost more now in rupee terms, say industry heads and experts. This burden comes at a time when most carriers are already incurring losses.
Low-cost airlines, such as IndiGo, SpiceJet and GoAir, which serve nearly half of the 50 million annual domestic traffic, have one-third of their quarterly cash outgo in foreign currency. “Weakening of the rupee has just begun. Its impact would be felt later,” said SpiceJet CEO Neil Mills.
“The high-cost aviation turbine fuel, coupled with a weakening rupee, is the biggest challenge that the aviation industry in India is currently dealing with and we are no exception,” Kingfisher Airlines chairman Vijay Mallya said.
01/10/11 Nirbhay Kumar, Vishakha Talreja/Financial Express
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