Jet, Kingfisher margins likely to crash on falling rupee

A falling rupee against the dollar has proved to be a double edged sword for ailing airlines struggling to fly in the black.
The aviation sector has already seen its operating cost go up significantly for the three months to September quarter as airline companies incur 30% expenses in dollar denomination. Secondly, the weak rupee could compress EBITDA margins to 3% from 12.3% Y-o-Y due to the weak rupee, say analysts
After falling to Rs 50 to a greenback few days back, the rupee is now at Rs 48.86 sending shockwaves to airline operators who are already reeling under losses for the past two quarters. While country’s largest private carrier Jet Airways had posted a net loss of Rs 123 crore for Q1, Kingfisher too posted a net loss of RS 263 crore on high fuel bills.
Jet Airways and Kingfisher Airlines officials with whom moneycontrol.com talked to have said that their Q2 topline has been dented as the rupee started to depreciate against the greenback by almost 12% when compared with the three months to June quarter.
"A sharp fall in the value of the rupee pushed up our external borrowing cost, lease rentals and salaries to expat staff. A falling rupee has bloated out operational cost by around 10% for the September quarter," says an official from a full service carrier.
31/10/11 Riken Mehta & Shaheen Mansuri/Moneycontrol.com

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Categories: Jet Airways Nov 2011, Kingfisher Nov 2011