India’s airlines feel the pain
MUMBAI – US magazine Business Week (www.businessweek.com) offers a fine insight into why India’s airlines are doing it tougher than most
In 2006, India’s airlines made headlines when they ordered 400 new planes—US$37 billion worth of flying machines—as the industry became a magnet for pilots from all over the world.
But all these ambitious plans and dreams have of late wound down, in large part due to the rise in global oil prices.
Nandini Lakshman, BusinessWeek Online’s India correspondent based in Mumbai, asks, “Why is India’s airline sector reeling more than those of other countries?â€
The answer, she says, is aviation fuel in India has tripled over the past three years and now is the most expensive in the world—80% higher than in most countries, including the U.S. and Britain.
“That’s in large part because of high federal and state government levies, including 15% oil marketing charges charged by India’s state-run oil companies.
“Indian carriers and foreign airlines that refuel in India must buy oil from Indian Oil, Hindustan Petroleum, and Bharat Petroleum
“New Delhi allows the oil companies to charge the airlines higher prices to make up for the fuel subsidies that the state-owned oil players are forced to offer the public for cooking oil, gasoline, and diesel.
“As a result, fuel accounts for nearly 50% of the operational costs of the Indian airlines, compared to a global average of 23%. Concerned by rising global crude oil prices, New Delhi raised aviation fuel prices by 18.5% in May, bringing added pain to India’s carriers.”
Lakshman says there’s worse news: “India’s aviation secretary Ashok Chawla said on June 10 that if oil prices continue to rise, airline losses this year could double, to $2 billion.
“India alone would then account for a third of the $6.1 billion global losses projected by the International Air Transport Assn.—the largest of any country.”
Ian Jarrett
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