The rupee’s free fall is expected to hurt air travellers. Over 70 per cent of airline costs — including fuel, leases, maintenance, foreign offices and so on — are linked to the dollar. The impact of a 16 per cent devaluation of the rupee over the last three months has hit Indian air carriers hard. They don’t have the ability to absorb it and may pass it on to passengers when the peak season starts in October. Inbound tourism is expected to increase with the dollar appreciation, providing a slight relief. The biggest headache continues to be high State taxes on the raw material — aviation turbine fuel (ATF). States such as Madhya Pradesh, Chhattisgarh and West Bengal are wooing airlines with zero or reduced taxes. Others are expected to follow suit. The big question is when Delhi and Maharashtra, which together account for nearly 45-50 per cent of the ATF consumption in India, will bite the bullet.
01/09/13 Business Line
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01/09/13 Business Line
