Caught in the pincer-grip of rising jet fuel prices and rock-bottom fares, airlines in India have bled losses of around Rs 2,000 crore in 2006-07, despite a 30% growth in revenues. This is nearly seven times more than the previous year?s Rs 301.74 crore losses. More importantly, the number of domestic air passengers over the same period has risen more than ever before, by about 40% to 35 million.
The civil aviation ministry estimates provide a clear indication of the financial state of India?s nine domestic carriers. While their cost of operation has gone up considerably, growth in revenues has not been proportional.
The soaring cost of jet fuel, which accounts for 40% of an airline?s operating cost, has been a major contributor to red ink on the balance sheet. According to analysts, the fuel bill of Indian carriers was estimated to be around $1.7 billion in 2006-07, based on September 2006 ATF prices. This is up from about $1 billion a year before.
ATF prices hit an all time high in the middle of 2006-07 on account of the sharp price in international oil prices. Every 20% rise in ATF prices adds 8% to an airline?s overall cost, the analysts added.
Similarly, salaries and other operational costs of Indian carriers have also saw a sharp increase in 2006-07. Industry estimates point out that the starting salaries of pilots have gone up by as much as 75% in the last one year thanks to the launch of more airlines. Salaries constitute about 20% of an airline?s cost.
Similarly, the leasing and financing cost of aircraft has also shot up by almost 50% in the last year as a result of huge orders placed by Indian carriers.