New Delhi: The rise in fuel prices impacts Indian airlines more than foreign ones as fuel accounts for 34% of an Indian carrier’s costs, while it is 24.2% globally, a top aviation industry executive said.
“To start, there is no real competition for fuel suppliers at (Indian) airports, so there is little commercial incentive to keep fuel prices competitive," said Alexandre de Juniac, director general and chief executive of International Air Transport Association (IATA). “Adding insult to injury, GST is then applied to the throughput fees, the infrastructure fee and the into-plane service fee," he said.
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Juniac’s statement at the International Aviation Summit—India held in New Delhi on Tuesday and attended by top executives of domestic and international airlines, comes at a time when airlines, especially those from India, have been hammered by higher jet fuel prices, a weaker rupee and intense competition, restricting their ability to raise fares to cover higher costs.
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In the past year, Brent crude has gained 47.79%, while the rupee weakened 9.58% against the dollar.
The issues of high cost environment for airlines because of the rise in fuel price and rupee depreciation and the airlines’ inability to pass on costs to passengers came up frequently at the summit.
“Indian airlines are focusing on increasing the load factor while we should be focusing on profitability," said Ajay Singh, chairman and managing director of low-fare airline SpiceJet. “I hope that airlines can raise their prices soon," Singh added.
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Meanwhile, Jayant Sinha, the Union minister of state for aviation, said the central government is looking to bring aviation turbine fuel under the goods and services tax (GST). However, this will need the consent of states, for whom fuel taxes are a major source of revenue.
“We are in talks with the finance ministry about what kind of support we can provide (to airlines) in view of the fact that there has been some deterioration on the macro side relating to crude prices and foreign exchange," Sinha said.
Meanwhile, the government is considering a relief package for airlines.
“I am unable to share the details of the relief package for the airlines at this stage but it would be relief on the financial side," said aviation secretary R.N. Choubey.
“The intention should be to bring the costs down," Choubey added.
With regard to the growth in the number of passengers, IATA said it expects 500 million passengers to travel to and from India by 2037.
“Indian airlines are preparing with 1,000 aircraft scheduled for delivery over the next eight years," Alexandre de Juniac said.
“Even that may not satiate the thirst for travel," he said.