Tuesday, September 11, 2018

Airlines bleed as big chunk of payments made in dollars

New Delhi: The rupee’s plunge against the dollar threatens to eat into airlines' profit as nearly 70 per cent of their expenses are in dollars. Lease rental, maintenance, spare parts, pilot training and a part of crew allowances are a few items that come under the head of payments in the US currency.

The rupee on Monday hit a new low of Rs 72.67 intraday against dollar on strong dollar demand from importers in view of the greenback strengthening in the overseas market on upbeat jobs data in the US.
The exchange rate has already taken a toll on major carriers Jet Airways, IndiGo and SpiceJet. The hit is severe in case of low-cost airlines which earn major chunk of revenue in rupee but have to pay in dollars.

“A 10 per cent depreciation in rupee results in 7 per cent increase in overall cost," said a senior airline executive. The domestic currency has depreciated by nearly 12 per cent so fat in 2018. To put it simply, supposing an airline's expenditure is Rs 2,000 crore per month. Nearly 70 per cent of the expenditure being dollar-related means Rs 1,400 crore expense is dollar-related. Now, if the rupee depreciates by 10 per cent, Rs 140 crore will be the impact per month.
11/09/18 Financial Chronicle