Airline cos savings take off with Re rise

Written by Shaheen Mansuri | Mumbai, Oct 4 | Updated: Oct 5 2007, 05:05am hrs
The firming up of the rupee in the past few weeks has benefited Indian airline companies, by effecting a saving in their dollar denominated expenditure. Airlines make payments for their expat pilots, lease rentals and in some cases even their overseas staff, in dollars.

The appreciation of the rupee has helped Indian carriers curtail their expenditure by nearly 10-15% in the past months.

Says S Venkat, company secretary of the National Aviation Corporation of India Ltd (NACIL), Foreign currency loans in our balance sheet will show lower expenses due to exchange fluctuation gains. To make the most of the situation, Air India has increased its rupee borrowings to remit it abroad for meeting our dollar commitment. Of the total dollar transactions for the airline, 20% is payment in the form of salaries, lease rentals and loan repayment in dollar currency, while 40% is the revenue from their overseas offices in various countries. These countries too have a strengthened currency against the dollar, hence, the airline is benefited. Although the remaining 20% revenues are from overseas, the airlines tend to gain from the surging rupee. Kingfisher CEO, Vijay Mallya told FE, We have benefited due to the surging rupee. We pay our expat pilots in dollars. The airline, which has over 180 expat pilots, has been able to manage 20% savings compared to last year during the same month.

Says Ruby Arya, HR head, Kingfisher Airlines, We have our aircraft delivery loan, lease rentals and aircraft maintenance charges in dollar terms. We pay nearly Rs 4-5 crore as salary to pilots which is 2% of the expenditure that we incur in dollar denominations. Saroj Datta, executive director, Jet Airways said the airline has saved over Rs 100 crore due to loan revaluation. In an emailed query, Air Deccan too replied in the affirmative. Strengthening of the rupee has enabled cost savings with respect to aircraft lease rentals, salaries of expats and also ATF. On the whole we have achieved 10%-15% net reduction on our expenditure, on account of the surging rupee.