Why Indian aviation is sick

New Delhi: The Indian aviation market, the ninth largest in the world, is going through the most turbulent times. Ironically, the airlines in the fastest-growing aviation hub are losing billions of dollars. Kingfisher is just the newest kid on the block. It is estimated that this year’s combined industry losses could cross Rs 15,000 crore.
Now is the time to introspect — what ails the industry? Why, after five years of continuous double-digit growth from 2005-08, has India’s domestic air market registered negative growth of 11 per cent in 2009? And why is the sector not able to fly into profits since?
“The Indian aviation sector is in the intensive care unit. To save we need thing is a magic wand,” says one of the top airline operators in the country when asked about the health of the Indian aviation sector.
High aviation turbine fuel (ATF) costs — possibly highest taxes on ATF in the world as it attracts anywhere between 4 per cent to 30 per cent sales tax in different states within the country — low yield per seat, not too impressive passenger carriage and high cost of capital and high interest rates, have all dragged the Indian aviation sector in the red.
To cite an example, ATF costs have gone up on an average by Rs 16,000 to Rs 20,000 per kilolitre in the four metros in past one year in the country, making aviation an expensive proposition even for carriers with deep pockets. High fuel costs have led to lower yields.
Had the aviation sector been in good health, India could have added another 50 aircraft (the average price of an medium sized or 130-150 seat aircraft is about Rs 300 crore a piece) to its existing fleet of 450 aircraft, for Rs 15,000 crore, which unfortunately is the projected loss for the Indian carriers in this fiscal.
19/11/11 Samiran Saha/Tehelka

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Categories: Indian Aviation- In General Nov 2011