New Delhi: Indian airlines are struggling hard as most of their costs like the ones related to aircraft leasing, plane's maintenance and fuel have to be paid in USDs, a Vistara official said on Friday, at a time when rupee has depreciated by approximately 6 per cent since January.
"The reason why the airlines are struggling this hard is because a lot of our costs are all in USD. And with continually depreciating rupee, and as most of us (airlines) predominantly operate in the domestic market, there is obviously going to be a mismatch," Vistara's Chief Commercial Officer Vinod Kannan said at a webinar organised by aviation consultancy firm CAPA.
While signing contracts with aircraft leasing firms or aircraft maintenance firms, airlines generally have to agree to make payments in USDs only.
In January, one USD was available for around Rs 71. On June 25, the exchange rate said one USD was of Rs 75.65.
Kannan said, "Whether it comes to fuel, aircraft leasing, aviation maintenance organisations or aircraft overhauls, it is all in USD. You can push down your costs to the lowest level possible, all you need is a Rs 10 increase (in price of a USD), or a depreciation of the rupee by 1-3 per cent."
"So, I think that is an important point. How do we address that? I am not sure...But I think it is very pertinent because you can be the slimmest, meanest organisation in the Indian context, but you still might not cut it purely because of factors that are outside your hands," he stated.
26/06/20 PTI/Economic Times
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"The reason why the airlines are struggling this hard is because a lot of our costs are all in USD. And with continually depreciating rupee, and as most of us (airlines) predominantly operate in the domestic market, there is obviously going to be a mismatch," Vistara's Chief Commercial Officer Vinod Kannan said at a webinar organised by aviation consultancy firm CAPA.
While signing contracts with aircraft leasing firms or aircraft maintenance firms, airlines generally have to agree to make payments in USDs only.
In January, one USD was available for around Rs 71. On June 25, the exchange rate said one USD was of Rs 75.65.
Kannan said, "Whether it comes to fuel, aircraft leasing, aviation maintenance organisations or aircraft overhauls, it is all in USD. You can push down your costs to the lowest level possible, all you need is a Rs 10 increase (in price of a USD), or a depreciation of the rupee by 1-3 per cent."
"So, I think that is an important point. How do we address that? I am not sure...But I think it is very pertinent because you can be the slimmest, meanest organisation in the Indian context, but you still might not cut it purely because of factors that are outside your hands," he stated.
26/06/20 PTI/Economic Times
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