Friday, October 26, 2018

Why airlines are bleeding despite double-digit passenger growth

The past few months have not been easy for Indian carriers. With crude oil prices reaching new highs and rupee depreciating around 13 per cent against the US dollar since the beginning of the year, the headwinds are showing no signs of abating.

Despite 50 consecutive months of double-digit passenger traffic growth, Indian carriers are yet to pass on the burden of rising aviation turbine fuel (ATF) prices to flyers. The weaker rupee and rising oil prices are not the only factors weighing on the domestic carriers, the intense competition has also led to price war in the sector.

While there are ample reasons for travellers to rejoice the giveaway fares offered by low-cost as well as full-service carriers, the widening losses due to escalating costs have severely affected the ability domestic airlines to weather the storm.

ATF prices have risen 38 per cent from Rs 50,200 per kilolitre (KL) in September last year to Rs 69,090 per KL in August 2018. This has dented the margins of several airlines and put pressure on yields - the average fare paid per mile, per passenger. The yields at IndiGo declined 10 per cent to Rs 3.21 in the second quarter of FY19.
Flying into the red for the first time after listing on bourses in November 2015, IndiGo's parent InterGlobe Aviation posted a loss of Rs 652.1 crore in the quarter ended September as the no-frills airline was battered by spiralling costs and intense competition. The country's largest airline with over 40 per cent market share, reported a profit of Rs 551.6 crore in the year-ago period.
25/10/18 Business Today

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