New Delhi: A bitter fare war coupled with increase in expenses will push several Indian airlines into losses in the second quarter.
The higher expenses are on account of an increase in the price of jet fuel and weakening of the Indian rupee against the US dollar.
While fuel cost is the single largest cost head for airlines, a weaker rupee translates to higher maintenance outgo, increase in lease costs and interest payment on foreign currency-denominated loans. These costs account for over two-thirds of sales.
“The impact of on loss due to depreciation of rupee on the lease liability could be as high as Rs 420 crore and Rs 180 crore for SpiceJet,” according to an estimate by brokerage firm ICICI Securities.
While the July-September period is a period when demand is weaker, what is compounding the woes of airline executives is that the competition between the airlines to provide low fare has continued even in the first week of October which is peak festive season. “Even during the days of Durga Puja tickets to Kolkata were being priced at Rs 5,000 or Rs 6,500. This is an all-time low and unheard of,” a senior airline executive said.
Analysts are of the view that the supernormal profit of the first quarter due to the grounding of Jet Airways was an aberration. The capacity situation has now normalised.
24/10/19 Arindam Majumder/Business Standard
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The higher expenses are on account of an increase in the price of jet fuel and weakening of the Indian rupee against the US dollar.
While fuel cost is the single largest cost head for airlines, a weaker rupee translates to higher maintenance outgo, increase in lease costs and interest payment on foreign currency-denominated loans. These costs account for over two-thirds of sales.
“The impact of on loss due to depreciation of rupee on the lease liability could be as high as Rs 420 crore and Rs 180 crore for SpiceJet,” according to an estimate by brokerage firm ICICI Securities.
While the July-September period is a period when demand is weaker, what is compounding the woes of airline executives is that the competition between the airlines to provide low fare has continued even in the first week of October which is peak festive season. “Even during the days of Durga Puja tickets to Kolkata were being priced at Rs 5,000 or Rs 6,500. This is an all-time low and unheard of,” a senior airline executive said.
Analysts are of the view that the supernormal profit of the first quarter due to the grounding of Jet Airways was an aberration. The capacity situation has now normalised.
24/10/19 Arindam Majumder/Business Standard
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