Click to play videoNew Delhi: Rising costs of aviation turbine fuel and a falling rupee have only added to the woes of the aviation sector in India. Air India accumulated losses of Rs 13,500 crore and Kingfisher airlines accumulated losses of over Rs 4,500 crore.
These numbers cast a dark shadow on India's growing aviation sector. Indigo airlines is the only profitable airline posting a yearly profit of Rs 650 crore as disclosed to the DGCA, but little is known of the company as it is privately held.
Centre for Asia pacific estimates that the Indian carriers will lose over Rs 10,000 crore. Majority of the losses stemming from Air India which could lose over Rs 8000 crore.
The government wants Banks to help airlines like Kingfisher, but banks are wary.
Managing Director SBI Hemant Contractor said, "We have asked Kingfisher to raise some fresh funds if the bank is to at all consider their request for restricting, we want to see more funds coming from the company itself."
"We have stressed this point time and again with the company that we have to be satisfied about the viability of the company because there is no pint in restructuring if the company's operations are not going to be viable," he added.
The reasons for the turbulance is largely due rising costs, price of aviation turbine fuel which alone contributes to over 50 per cent of an airlines operational cost has doubled in the last three years.
Fierce competition has also hit full service carriers like Air India, Kingfisher and Jet Airways as they compete with no frills airlines. Air India is awaiting a government bailout, private airlines are hoping for a miracle. Should the government help out?
The government can rationalise sales tax on aviation fuel. The taxes vary from 23-33 per cent in certain states. Airlines say cost of aviation fuel is 70 per cent more in certain states when compared to other countries. Global airlines are not in the pink of health. If the current scenario continues expect a second round of consolidation.
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