Tuesday, October 23, 2018

Rising oil prices, falling rupee bring bad news for IndiGo, SpiceJet and Jet Airways

Credit rating agencies Icra and Crisil have downgraded various loan facilities of the three listed airlines - IndiGo, SpiceJet and Jet Airways. This has come as a combination of airline market compulsions in India, rising oil prices and falling rupee in the past several weeks.

IndiGo, SpiceJet and Jet Airways have seen this downgrading of credit rating assigned to some of their loan facilities at a time when they grapple with rising expenses and limited room to hike fares amid intense competition.

India has one of the fastest growing aviation markets in the world but local carriers are facing tough business conditions thanks to surging oil prices and depreciation of the rupee. The airliners constantly look to woo more passengers with cheaper competitive fares, they have not been fully able to increase ticket prices.

Against this backdrop, Icra cut the long-term rating on outstanding Rs 8,000 crore worth bank facilities of InterGlobe Aviation Ltd on October 17 even as it re-affirmed the short-term rating.

"The rating action takes into consideration expected adverse impact of the significant increase in operating costs of airlines, including IndiGo, and their limited flexibility to effect price hikes to offset cost pressures," Icra said in a report.

"Over the last nine months, the Indian rupee has witnessed significant depreciation against the USD, which coupled with sharp rise in global crude oil prices has led to 34 per cent year-on-year increase in domestic Aviation Turbine Fuel (ATF) prices and other operating costs of airline companies during H1 FY 2019," Icra said.
23/10/18 India Today

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