India on Tuesday said it was working on a relief package for a battered airline industry that an aviation consultancy forecasts will lose up to $1.9 billion this financial year, mainly from rising costs and low fares.
Two of the biggest and oldest carriers, Jet Airways and state-owned Air India, are struggling to stem losses in the world’s fastest-growing domestic aviation market, where competition is intense and fuel taxes are high.
But Rajiv Nayan Choubey, the top civil aviation bureaucrat, said on the sidelines of the International Aviation Summit in New Delhi that help to cut airline costs was on the way, according to Reuters affiliate NewsRise.
He did not give details of the measures planned.
Challenges for the airlines include high fuel taxes and a goods and services tax on maintenance operations that makes domestic work uncompetitive, consulting firm CAPA India said in a report on Monday.
It forecast an industry loss of up to $1.9 billion in the financial year ending March 31, up from a January estimate of a loss of $430 million to $460 million, the difference fuelled largely by a weakening rupee and a rise in oil prices.
CAPA estimated that India’s airlines, including Air India, need an additional $3 billion of capital in the near term to shore up balance sheets.
Choubey on Tuesday said the government would offer Air India state-guaranteed borrowing worth 21 billion rupees ($294 million), along with an equity infusion of 8.6 billion.
“If we do not support Air India, there may be a value erosion,” NewsRise quoted Choubey as saying.
In June, the government said it had been unable to attract bidders for a stake of 76 percent in the airline.
Indian airlines, which have ordered hundreds of new Airbus SE and Boeing Co jets, have struggled to stay profitable despite filling nearly 90 percent of seats as domestic passengers numbers have more than doubled over the past four years.
India is one of the world’s cheapest domestic airline markets and deals such as $50 one-way tickets on the two-hour flight from Mumbai to Delhi are easy to find.
“While it is easy to find Indian passengers who want to fly, it’s very difficult for airlines to make money,” said Alexandre de Juniac, director general of the International Air Transport Association.
The cut-throat competition and high fuel prices weigh on airlines big and small.
Full-service Jet Airways last month reported a quarterly loss of 13.23 billion rupees, saying it aimed to cut costs, inject capital and monetise its frequent flyer programme.
In July, budget carrier IndiGo, the country’s largest airline, reported its lowest quarterly profit in three years, with earnings down 97 percent.