It is not just India's state carrier Air India that is debt-laden but airlines around the world are taking a hit at their profitability because of three important factors.
It is not just India’s state carrier Air India that is debt-laden but airlines around the world are taking a hit at their profitability because of three important factors. In an interview with CNBC-TV18, Minister of State for Civil Aviation Jayant Sinha said that higher oil prices, currency fluctuations and higher interest rates have sharply brought down the profitability of airlines around the globe.
“If we look around the world how airlines are doing, especially the full-service carriers, you will see that higher oil prices, currency fluctuations and higher interest rates have sharply brought down the profitability,” Jayant Sinha said. On failing to get any buyer for beleaguered Air India, Jayant Sinha said that the (aviation) industry dynamics is such that people are not enthusiastic about the disinvestment. He said that market conditions were not conducive enough to elicit interest.
The International Air Transport Association (IATA) last month also warned that surging oil prices were denting airlines’ profits and could significantly hurt their bottom lines next year. Oil has been trading over $75 a barrel amid concerns about supply disruptions caused by the United States’ decision to quit the Iran nuclear deal and unrest in Venezuela. “We see more forces pushing prices up than down,” said IATA, which represents 280 airlines that make up 83% of global air traffic.
On the reports that Life Insurance Corporation (LIC) may be asked to rescue Air India, Jayant Sinha told the news channel that the government is open for a range of financial alternatives but he would not speculate. He said that government aims to ensure that Air India thrives, prospers, and is really globally competitive in every way. He said that the disinvestment process opens up the possibility of achieving the target of making Air India globally competitive.