Do More With Reuters
Partner Services

INTERVIEW-Tough times seen for India carriers till FY10

Fri May 30, 2008 11:23am IST
 
Email | Print | | Single Page
[-] Text [+]

By Rakesh Sharma and C.J. Kuncheria

NEW DELHI, May 30 (Reuters) - Spiralling costs of aviation fuel, magnified by some of the highest taxes in the world, will bleed Indian carriers this year and the next, a leading aviation consultant said, but the sector would recover in 2010.

Crude oil CLc1 prices have risen over 30 percent this year to break a crucial $130-a-barrel level last week, bumping up benchmark Asian jet-fuel prices JET-SIN by over a half.

And Indian taxes ensure aviation-turbine fuel (ATF) prices are three-fourths costlier than international benchmarks. Fuel makes up 40 percent of the operating cost of an Indian carrier.

"The next 12 months will be very hostile, extremely hostile, for airlines," Kapil Kaul of the Centre for Asia Pacific Aviation (CAPA) said in an interview. "ATF will kill in 2008 for sure."

"In 2002, global oil prices were less than $20 a barrel. Indian airlines were, even at that time, not profitable. How can they be profitable at $130 a barrel?"

A wave of mergers in 2007, notably of top private carrier Jet Airways (JET.BO: Quote, Profile, Research) with budget airline Air Sahara, and Kingfisher Airlines with Deccan DECA.BO, were to have brought benefits to the sector October onwards, Kaul said.

But CAPA is revisiting its forecast after the run on crude, and Kaul, who is the chief executive for the Indian subcontinent and the Middle East, said the industry's losses in the year to March 2009 could double.

"Our assumption is that we would contine to see in excess of $1-$1.5 bln dollars losses," Kaul said, adding the industry in 2007/08 lost $700 million.  Continued...

Russian Finance Minister Alexey Kudrin poses with his G20 colleagues and central bank leaders during the family photo at the G20 Finance Ministers meeting at a hotel in St. Andrews, Scotland. REUTERS/POOL New
Pledge to support economies

G20 financial leaders pledged to prepare strategies to end emergency support for their economies, but to keep the aid flowing until recovery was assured.  Full Article | Related Story 

special coverage

Photo
Central Banks Cautious

Reuters tracks the policies of the world's top central banks as the debate over global economic recovery rages on.  Full Coverage 

Market Update

  • IndiaIndia
  • USUS
  • UKUK
  • Asia
  • Most Actives

SHOWCASE

Sanjay Sinha
Balancing Act

In India, it is a tough choice between growth, managing inflation and financial stability.  Full Article 

 
Nipun Mehta
Road to Recovery

There needs to be an acceptable balance created between education and healthcare and infrastructure spend, says Nipun Mehta of SG Private Banking.   Full Article 

 
Robot Asimo

Snapshots of Honda Motor's humanoid robot Asimo  Slideshow 

 
Marketing Strategy
Marketing Strategy

Companies are now using direct marketing methods to sell their products.  Full Article 

 
Exit Plans
Exit Plans

Factbox - Stimulus exit plans for Asia-Pacific's big 5 economies  Full Article