The high cost of fuel is resulting in falling fortunes of airlines across the globe. Last month, Canada’s WestJet reported its first quarterly loss in 13, as it struggled with a 38 percent rise in fuel costs; US-based Delta Air Lines expects its current fuel bill to be higher by $2 billion.
Back home, IndiGo saw profit fall by 97 percent to ₹27.8 crore in the first quarter of fiscal 2018 as against ₹811 crore last year. Jet Airways, which celebrated its 25th year, is reported to be struggling to stay afloat as its finances are in the doldrums.
Despite double-digit growth, India’s aviation industry is facing challenges: A depreciating rupee on one hand, and the mismatch between high fuel prices and low fares on the other. Adding to this are the structural challenges of the industry.
“The good news is these problems are man-made and, hence, can be solved. They just need political and bureaucratic will,” says Amber Dubey, partner and India head of aerospace and defence at KPMG. Including Aviation Turbine Fuel (ATF) under the Goods and Services Tax (GST) regime would be one such move.
At present, there is a 14 percent excise duty and value-added tax of up to 30 percent on ATF. At the highest GST slab of 28 percent, there would be a shortfall in tax on ATF. However, Dubey says, “The boost to the economy, jobs and taxes from traffic growth will compensate for it.”
Jitender Bhargava, former executive director of Air India, says Indian airlines sell cheap tickets to gain market share: “They need to give equal priority to economic viability as to the protection of market share.”
(This story appears in the 31 August, 2018 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)