Sunday, March 17, 2019

Fuel prices, rupee depreciation some of the main ills affecting aviation sector

New Delhi: Of the 638 total big passenger airplanes in Indian skies, 18 Boeing 737 Max aircraft are grounded. That's bad news, but it dwarfs in the face of the many deep air pockets that India's aviation sector is facing now.

High aviation fuel prices, rupee depreciation, excessive parking and landing charges, loads of debt and fare wars, even some inefficient operations, have been the millstones around the airline industry. Just last quarter there were indications that the industry was on the verge of a mild recovery, even though the distress is far from over.

Airlines such as Jet Airways, IndiGo, SpiceJet, GoAir and Air India continue to struggle when it comes to financial and operational performances. "Jet's operating fleet has nearly halved; Air India's fleet is down by almost 20 per cent, and the 737 MAX grounding is the most unfortunate thing to have happened to the aviation sector. Six airlines that had bid under the UDAN scheme have shut down operations. With all these developments, the passengers will be affected because of lesser number of flights and higher fares. Ticket prices are already costing an arm and a leg on some sectors," says Mark Martin, founder of Martin Consulting.

Take the case of Jet Airways. The Mumbai-based full-service carrier has been battling its biggest financial crisis in history. Recently, the Naresh Goyal-controlled carrier has defaulted on its foreign loan repayment due to liquidity crunch, and is staring at a fault of $109 million which it has to pay by March 28 to the HSBC Bank Middle East. Its lenders have prepared a resolution plan which includes Goyal's shareholding coming down to about 20 per cent from the present 51 per cent. Under the plan, the banks will take control of the airline and appoint a new board. The plan is still stuck in the approval stage. The problems with IndiGo are not as complex as Jet.
17/03/19 Manu Kaushik/India Today