Indian airlines should cut flab for profits - KPMG

NEW DELHI (Reuters) - India's loss-making airline sector should accept rising jet-fuel prices as a way of life and focus on savings from improved operational efficiencies, consulting firm KPMG said on Thursday.

Indian airlines are expected to double their combined loss for the 2009 fiscal from last year to 80 billion rupees and the aviation industry has called for taxes on aviation turbine fuel to be slashed.

ATF prices, which make up between 30 percent and 45 percent of an airline's operating cost, have risen more than 83 percent in the year to July in India, driven by crude oil's relentless rise, coasting past a record $145 a barrel on Thursday. Three fourths of ATF costs are from taxes.

"I'm really happy this has happened, as it's shaken people up," Marc Martin, senior advisor for aviation at KPMG, told Reuters.

"People should wake up and smell the daisies and say: my god, it's not hunky-dory, we need to get our act together and start getting leaner as an organisation."

KPMG said in a report the industry's losses were largely due to the huge investments into fleets and support facilities and it would take a minimum of five to seven years to break even.

"Since a majority of India's airlines are today in their third or fourth year of running, it becomes near to impossible for break-even to occur any time before 2009 or 2010," it said.

Indian airlines would get into the black in 3-5 years, despite rising fuel prices if they improved their operational performance, Martin said.

Airlines could make savings by efficiently moving aircraft away from lean sectors to busier routes, he said.