Indian airlines are struggling so hard as most of their costs as like the ones related to the aircraft leasing, plane’s maintenance, and fuel have to be paid in US dollars, as a Vistara official told on Friday, at a time when the rupee has depreciated by approximately 6 percent since January.
“The reason behind why the airlines are struggling this so hard is that a lot of our costs are all in the US dollar. And with continually depreciating rupee, and also as most of us airlines predominantly operate in the domestic market, as there is obviously going to be a mismatch,” as Vistara’s Chief Commercial Officer Vinod Kannan said at a webinar organized by aviation consultancy firm CAPA.
Whereas signing contracts with aircraft leasing firms or an aircraft maintenance firms, airlines generally have to agree to make the payments in US dollars only. In January, one of the US dollars was available for around Rs 71. On June 25, the exchange rate said one US dollar was Rs 75.65.
Kannan told that – “Whether it comes to the fuel, aircraft leasing, an aviation maintenance organization or the aircraft overhauls or not, it is all in the US dollar as well. You can push down your costs to the lowest level possible, all you need is a Rs 10 increase (in the price of a US dollar), or a depreciation of the rupee by 1-3 percent.”
“So, I think that is an important point. How do we address that? I am not sure…But I think it is very pertinent because you can be the slimmest, meanest organization in the Indian context, but you still might not cut it purely because of factors that are outside your hands,” he stated.
Calling the corona virus pandemic situation a “black swan” event, as Kannan noted that the airlines have a fundamental knack of the ordering aircraft whenever the times are good, and also getting the delivery when the times are bad.
“So that is a very important reason why the airlines not only just in India but around the world have to think twice before about (aircraft) utilization likewise see how we could improve aircraft utilization than order more aircraft,” as he stated.
After a gap of the 2 months, the Indian govt resumed domestic flight services on 25th May albeit in a curtailed manner and with the limits placed on airfares as well.