Saturday, November 03, 2018

Fare hike necessary for airlines to sustain operations in India, says CRISIL

New Delhi: Rising fuel costs due to high crude oil price has pushed airlines into the red zone this fiscal. Airlines are looking at the steepest loss in over a decade stated Crisil on Thursday. A 12 per cent fare hike is necessary to offset the ATF price rise and depreciating rupee double blow, CRISIL stated.

It may be noted that aviation turbine fuel (ATF) accounts for about 20-40% of the total cost of airlines, while engine rentals and maintenance accounts for 30-35% cost. ATF is expected to average 28% higher on-year compared to FY18 and this will impact the airlines significantly. With rupee depreciating 13% against the US dollar since March this year, engine rentals and maintenance cost which is denominated in US dollars will impact the airlines even more.
Senior Director, CRISIL Ratings, Sachin Gupta said in the Crisil report, "Almost two-thirds of an airline’s cost, and therefore profitability, is susceptible to fluctuations in forex rates and ATF prices." He further said that in order to offset the increase in operating cost, the airline industry will have to raise fares by 12%. This is assuming that passenger load factor (PLF) remains unchanged.
02/11/18 Times Now News