Still no way for airlines to make money in India

World’s fastest growing aviation market buffeted by high taxes and poor infrastructure

India may be the world’s fastest-growing major aviation market, but it is difficult for airlines to make money as excessive taxes and poor infrastructure choke the industry, according to the International Air Transport Association.

While jet fuel accounts for about 24 per cent of a carrier’s average costs globally, it is 34 per cent in India, making domestic airlines even more vulnerable when oil prices rise, Alexandre de Juniac, CEO of IATA, said. Federal and local levies of up to 30 per cent add to the burden, he said.

“India’s regulatory and tax framework around fuel hits airlines serving this market even harder,” he said. “India is a particularly challenging place to do business.”

As rising income spurs an air travel boom in the $2.6 trillion (Dh9.5 trillion) economy, about 10 carriers are vying for passengers taking to the skies for the first time in their lives, offering discounts that have pushed down fares so low that they can barely recover costs. A surge in crude oil prices and a weakening rupee have weighed on their operations.

Meanwhile, Reuters reports that India is working on a relief package for its airline industry, which is forecast to lose up to $1.9 billion this financial year. Rajiv Nayan Choubey, the top civil aviation bureaucrat, said that help to cut airline costs was on the way along with a planned $120 million capital injection for Air India.

Choubey, who was speaking on the sidelines of the International Aviation Summit in New Delhi, did not give details.

Jet Airways India Ltd was the latest to signal financial distress, last month reporting its biggest quarterly loss since 2015.