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Loss-making Indian airline companies could turn the corner and report operating profits in the December quarter, said a top Boeing official.
“Q3 generally tends to be a lucrative quarter in India because of better weather (vis-à-vis Q2) and the festival season. Carriers tell us that the advance booking numbers are looking good and so I feel comfortable saying that that the aviation industry may report a profit this quarter,” DineshKeskar, Senior Vice-President of Sales, Asia-Pacific and India at Boeing, told Business Line.
Exchange rate
Moreover, the exchange rate, too, has stabilised with the US dollar trading in the 61-62 band to the rupee. For Indian carriers, around 70 per cent of costs such as fuel, lease rentals, and spares, are billed in dollars, while a lion’s share of the revenue is rupee-denominated.
Keskar, however, believes that rupee depreciation, slowing down GDP growth and high fuel prices are continuing risks for the sector. “Will this expectation (of airlines returning to profitability in Q3) remain if the exchange rate goes to 70? Absolutely not. But one does not expect such drastic movements,” he said.
A report by the Centre for Asia Pacific Aviation says losses for the domestic airline sector are expected to exceed Rs 3,000 crore in the second quarter ending September 30, largely due to “irrational pricing” and the weak Indian rupee.
All five functional airlines are expected to be in the red in Q2. Recently, Jet Airways announced a quarterly net loss of Rs 891 crore, the highest in its operating history, largely due to high fuel costs, depreciating rupee and one-time maintenance costs.
Cost-effective option
It is in this context that Boeing is pitching aggressively for its 787 Dreamliner as a cost-effective option for the Indian aviation industry. According to Keskar, this aircraft uses 20 per cent less fuel than its counterparts.
Even while it was hailed for its fuel-efficiency, the Dreamliner was hit by years of production delays and was grounded globally in January after lithium-ion batteries overheated on two different planes.
On October 8, a panel in an Air-India Dreamliner came off as the plane was landing in Bangalore. Keskar said Boeing is in touch with Air India and the relevant authorities to examine the possible cause of this incident.
Yet, he is optimistic about the road ahead. “The Dreamliner is an integral part of Air India’s turnaround strategy. We understand (from AI) that many routes that were not profitable earlier have turned around after they deployed the Dreamliner,” said Keskar.
AI operates this aircraft between Delhi, Chennai, Bangalore and Kolkata, and also in long-haul international operations.
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