Mumbai: Domestic airlines are projected to post the steepest losses in a decade in the current fiscal year owing to higher aviation fuel costs and falling rupee, rating agency Crisil said in a report Thursday.
Pitching for a 12 per cent hike in airfares to offset the increased costs, the report also forecast debt liability of three listed airlines to go up by 10 per cent by FY19.
At present, full service carriers Jet Airways and budget airlines SpiceJet and IndiGo are listed on bourses. They account for 71 per cent of the total passenger traffic.
Aviation turbine fuel (ATF) accounts for 35-40 per cent of the total cost of airlines, while aircraft, engine rentals and maintenance costs, which are denominated in US dollars, together account for another 30-35 per cent of the costs, as per Crisil.
“At an estimated Rs 9,300 crore, the industry’s losses at EBIT (earnings before interest and tax) level would surpass the Rs 7,348 crore blow it was dealt in fiscal 2014. That was followed by three good years through fiscal 2018, when carriers reeled in aggregate profit of Rs 4,000 crore on average at the EBIT level,” the report said.
The agency in its report also said that the profiles of airlines will remain under pressure over near-to-medium term on account of significant increase in operating cost and limited ability to pass on cost increases to customers because of intense competition.