Tuesday, September 04, 2018

It's Hard for Airlines to Make Money in India, IATA Says

India may be the world’s fastest growing major aviation market, but it is difficult for airlines to make money as excessive taxes and poor infrastructure choke the industry, according to the International Air Transport Association.

While jet fuel accounts for about 24 percent of a carrier’s average costs globally, it is 34 percent in India, making domestic airlines even more vulnerable when oil prices rise, Alexandre de Juniac, chief executive officer of IATA, said in New Delhi on Tuesday. Federal and local levies of up to 30 percent add to the burden, he said.

“India’s regulatory and tax framework around fuel hits airlines serving this market even harder,” he said at a conference in New Delhi. “India is a particularly challenging place to do business.”

As rising income spurs an air-travel boom in the $2.6 trillion economy, about 10 carriers are vying for passengers taking to the skies for the first time in their lives, offering discounts that have pushed down fares so low that they can barely recover costs. A surge in crude oil prices and a weakening rupee have weighed on their operations. Jet Airways India Ltd. was the latest to signal financial distress, last month reporting its biggest quarterly loss since 2015 and revealing plans to cut its debt pile and raise funds to meet liquidity needs.
04/09/18 Anurag Kotoky and Rajesh Kumar Singh/Bloomberg

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