Cutthroat competition among airlines operating from India has significantly dented the profit earnings of domestic airlines, according to an aviation consultancy that has forecast a $1.9 billion loss this financial year, mainly due to rising costs and low fares.
Consulting firm CAPA India, in a report released on Monday, forecasts an industry loss of up to $1.9 billion in the financial year ending March 31, 2019, up from the January estimate of $430 million to $460 million.
"Today, airfare is less than that of an auto-rickshaw. You'll ask how is that possible? When two people take an auto-rickshaw they pay a fare of INR 10 which means they're charged INR 5/km but when you go by air you are charged INR 4/km. So on a per km basis, our airfare is among the lowest in the world," Jayant Sinha, India's minister of state for aviation, said while speaking at the International Aviation Summit on Tuesday.
Today airfare is less than that of an auto-rickshaw. You'll ask how is that possible? When two people take an auto-rickshaw they pay fare of Rs 10 which means they're charged Rs 5/km but when you go by air you are charged Rs 4/km: Jayant Sinha, MoS Civil Aviation (03.09.2018) pic.twitter.com/orbwOvdDLJ— ANI UP (@ANINewsUP) September 4, 2018
Meanwhile, owing to the government's push for air connectivity to smaller cities, Indian airliners have recorded nearly 90 percent occupancy as domestic passengers have more than doubled over the past four years.
"While it is easy to find Indian passengers who want to fly, it's very difficult for airlines to make money," Alexandre de Juniac, director general of the International Air Transport Association, said at the Aviation Summit.
While jet fuel accounts for about 24% of a carrier’s average costs globally, it is— markets are supreme (@bear_bull_cycle) September 5, 2018
34% in India, making domestic airlines even more vulnerable when oil prices rise, Alexandre de Juniac, chief executive officer of IATA