January 30, 2017 TnH Global

Rise in fuel costs, slide in rupee to hit Indian airlines: report

Aviation in India will be impacted by the rise in fuel costs in the first quarter of 2017. The slide in the value of the rupee will also impact the earnings of all airlines, Martin Consulting said in its ‘Review of Indian aviation in 2017’ report.

Passenger traffic

The report warns that the increase in global aviation fuel prices could result in “casualties” among Indian airlines.

The report points out that the projected rise in global aviation fuel prices is expected to cast a shadow on passenger growth numbers in the near term adding that much of the over 20 per cent growth in domestic passenger carriage is on account of airlines managing to absorb costs to churn out sustainable air fares.

“This will be tested in the course of the coming year,” the report says.

The report which was released on Sunday adds that demonetisation will add to the negative sentiments affecting GDP growth, access to travel is likely to be impacted and airlines may find it a challenge to sustain growth and yields should airfares increase. Martin Consulting works with airlines in India, South-East Asia, Africa, East Europe and Africa.

CAPA warning

Interestingly the Centre for Asia Pacific Aviation (CAPA) had also warned as early as end-December that the on-going demonetisation drive and the roll out of the Good and Services Tax (GST) sometime in 2017 could impact the growth prospects of the domestic aviation industry in the next fiscal.

“The Government’s demonetisation move could impact the growth of the domestic civil aviation market by as much as 3-5 per cent in 2017 though the next fiscal is expected to be the third consecutive year of domestic growth above 20 per cent,” CAPA Aviation Outlook for Fiscal 2018 had estimated.

News Source: www.thehindubusinessline.com