Loss-Laden Indian airlines industry is likely to save as much as 10% on operational cost if the rupee manages to stay around its current level against the dollar, the possibility of which looks bright, analysts say. This possible saving may be a boon for the domestic carriers which suffered a combined loss of Rs 10,000 crore last year.
Almost a third of an airline’s operational expenses are denominated in dollars. An airline pays a monthly lease rental of around Rs 50 lakh for an aircraft if the dollars valuation. Other costs such as parking fees, navigation charges and expats employee costs would be less if the rupee holds out against the dollar.
The rupee rose to a one-year high to 46.14 a dollar on October 15 on strong capital flows. It grew 0.24% in last week and 5% this year. However, it’s still 12.8% above the record low of 52.2 per dollar in March this year.
“The rupee is expected to be around 45 a dollar by December and gradually breach this level by the end of fiscal as India is seeing a surge in dollar inflows,” said an analyst with a domestic brokerage.Interstingly, strengthening of dollar also impacts the aviation turbine fuel prices as oil marketing companies buy crude oil in dollar before selling it to domestic carriers.ATF constitutes 45% of an airline’s operational costs.
Some Indian carriers such as Jet Airways and Spice Jet have already announced that they might bounce back in the black next year. The weakening rupee is expected to further help them .Experts say ATF prices will fall further due to slipping crude oil and a rising rupee. For the third fortnight in a row, the state owned oil firms slashed ATF prices by 2.4% on Thursday on strengthening of rupee against dollar. Currently, ATF costs Rs 37,300 per kl in Mumbai, home to the nation’s busiest airport, from Rs 38,246.Domestic airlines carried almost 25% more passengers in three months ended September, bringing cheers to carriers.
|
|
