New Delhi: India’s next government faces the challenge of turning around an aviation sector in which the top three airline firms are expected to borrow around $2 billion (Rs9,960 crore) this year as they struggle with high losses and declining passenger traffic, a report released on Thursday said.
Market debt at National Aviation Co. of India Ltd-run Air India, Jet Airways (India) Ltd and Kingfisher Airlines Ltd is expected to increase to $10 billion this year, from $8 billion, the report by Sydney-based aviation consultancy Centre for Asia Pacific Aviation said. The report, entitled ‘An Aviation Agenda for the next Indian Government’, said: “The over-aggressive expansion of the big three carriers is partly responsible for the fiscal demise of the sector.”
Testing times: An Air India aircraft at IGI airport in New Delhi. India’s carriers lost around $2 billion in the fiscal year to 31 March. Ramesh Pathania / Mint
India’s carriers lost around $2 billion in the fiscal year to 31 March when oil prices spiked and the passenger count fell. Many of these are now finding it difficult to fund operations in the wake of the global crash crunch and some have missed payments to vendors, including the state-run oil marketers.
The report said this situation might require fresh thinking by the new government to guide a sector that employs 100,000 people directly, half of them with state-run firms.
“Indian banks and financial institutions now have significant exposure to the aviation sector and it is uncertain how much more they will be willing to take,” the report said. “With local sources of capital drying up, the ability to tap foreign investors will be key to the survival of several airlines over the next 12-18 months.”
Overseas airlines are currently not allowed to invest in Indian carriers.
The consultancy also believes that India’s air passenger market “is not large enough to support three large full-service carriers operating and competing on similar footprints”.