Chennai: Airline companies operating in India require a strong and supportive promoter to improve their viability amid the challenging operating environment. "Companies are prone to becoming distressed assets due to their cost structure related inefficiencies driven by taxation and regulatory issues, high financial leverage and chronic cash flow generation issues,'' India Ratings & Research said. Globally, the airline sector is most vulnerable to cyclical demand due to capital intensity and price wars.
The agency estimates that tax on aviation turbine fuel erodes Indian airline companies' operating margins by around 12-18% points. "Higher estimated maintenance cost and sundry taxes further weaken the margins. Infrastructure-related constraints make aircraft handling and scheduling inefficient," India Ratings said. The agency estimates that the utilisation level (measured as block hours of an airline) of domestic aircrafts is 10%-15% lower than that of profitable global players. The route disbursal guidelines, some of which mandate airlines to fly on economically unviable routes, further impact the operating margins.
23/08/13 Aparna Ramalingam/Times of India
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The agency estimates that tax on aviation turbine fuel erodes Indian airline companies' operating margins by around 12-18% points. "Higher estimated maintenance cost and sundry taxes further weaken the margins. Infrastructure-related constraints make aircraft handling and scheduling inefficient," India Ratings said. The agency estimates that the utilisation level (measured as block hours of an airline) of domestic aircrafts is 10%-15% lower than that of profitable global players. The route disbursal guidelines, some of which mandate airlines to fly on economically unviable routes, further impact the operating margins.
23/08/13 Aparna Ramalingam/Times of India
