NEW DELHI: Oil companies on Saturday lowered aviation turbine (ATF) prices by almost 11%, giving some respite to struggling-to-survive Indian carriers. In Delhi and Mumbai, a kilo-litre of jet fuel will cost Rs 68,050.97 and Rs 67,979.58 in December, respectively down from Rs 76,380 and Rs 76,013.2 last month.
While jet fuel prices are linked to Brent crude, the aviation ministry has long been asking for ATF to be brought under GST in a bid to rationalise different tax rates of different states. Jet fuel for domestic flights in India is among the most expensive globally.
“We have requested the finance ministry for two things — bring ATF under GST and for input tax credit for aircraft of Indian carriers being serviced abroad,” aviation secretary R N Choubey said recently.
Rating agency ICRA recently said India’s domestic airline industry is facing a double whammy with increasing ATF prices and depreciation of the Rupee against the US Dollar. ATF is the single largest cost element for airlines, accounting for almost 30% to 40% of their total operating expenses.
Earlier this week, Kinjal Shah, (VP) of ICRA’s corporate sector ratings, said: “The (Indian aviation) industry’s financial health has nosedived, with the three listed airlines having reported a combined net loss of Rs 3,640 crore in H1 FY2019. That means the three listed airlines together have lost about Rs 20 crore per day during H1 FY2019.”
In a statement, ICRA said while domestic passenger growth continues to be robust, “the challenges are equally confounding as airlines resort to predatory pricing so as to maintain their passenger load factors (PLFs) in an environment of increasing capacities. This has resulted in deterioration in the industry economics, and thus, financial stress. Over the last two years, four airlines (Air Carnival, Air Costa, Air Pegasus, Zoom Air) have already suspended their operations.”
“The overall debt levels in the industry remain high and would require equity infusion to bring the same to reasonable levels. ICRA believes an equity infusion of Rs 35,000 crore would be needed over the next 3-4 years. In the near term, the balance sheets of Indian carriers are expected to continue to remain stressed until the carriers are able to reduce their debt burden through a combination of improvement in operating performance and/or by way of equity infusion,” Kinjal Shah added.