Foreign investment in aviation unlikely to soar for now

Mumabi: The aviation industry in India has to overcome several challenges before a turnaround happens, since capital infusion can seldom be a solution to a weak business model, say aviation analysts.
While FDI in aviation may bring in much-needed long-term financial and strategic capital and expertise, the aviation industry has to overcome high fuel costs, stiff competition and its capital-intensive nature with high fixed costs.
Analysts said fuel costs, the largest cost component for airlines, considerably impacts operating margins, but are beyond their control. Aviation turbine fuel (ATF) prices are driven by fluctuations in global crude oil prices.
Currently, national sales tax average is 25-30 per cent on ATF, which is a major burden for Indian carriers as fuel costs account for over 45-50 per cent of costs.
Nivedita Ganguly/Business Line

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Categories: Foreign Sep 2012, Indian Aviation- In General Sep 2012