• A double hit for the aviation sector


• The rupee touched 90 rupees against the dollar


• Rupee depreciated but expenditure increased

Indian Airline losses: The Indian aviation market is one of the fastest growing markets in the world. Yet it is consistently loss-making for airlines. The recent turmoil at IndiGo, the country’s largest airline, has once again sparked a debate on whether it is really difficult to operate an airline in India. AirAsia’s CFO Vijay Gopalan’s statement is being considered as an alarm bell in the background of this serious incident.

The current state of the airline industry in India is not just a failure of management, but a structural flaw in the system. Airlines are collapsing as a result. Describing the harsh reality of the Indian aviation sector, AirAsia CFO Vijay Gopalan said that profitability is extremely difficult in the current structure of the Indian aviation market.

Change is difficult in the aviation industry:

Half of the cost of airlines is on jet fuel i.e. air turbine fuel. Most surprisingly, this fuel is not subject to GST. State governments levy their own taxes on it. In some states this tax is more than 30%. In a commodity business, where margins are extremely low, if 50% is spent on fuel, it creates a problem. Gopalan explained that without rationalizing this situation, it is difficult to transform the aviation industry. Gopalan said

That, dollar payments are another major source of problems for airlines in India. According to Gopalan, 75% of airline costs are paid in dollars. Be it air fares, maintenance and repairs or spare parts, everything is paid in dollars. Currently, the rupee has touched Rs 90 against the dollar. Two years ago, when it cost $100 to rent a plane, we had to pay Rs 8,000.

Today, we pay Rs 9,000 for the same flight. This simply means that without any additional services or increased business, the rupee’s weakening has directly increased airline costs. Gopalan said foreign tenants consider India a ‘risky market’. Leasing costs for Indian companies are higher than the global average. India also faces some infrastructure issues.