High costs, low airfares causing airline losses: Naresh Goyal

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Steep operational costs and low air fares in India are causing sustained losses for domestic airlines, Jet Airways chief Naresh Goyal said on Wednesday.

"While the growth outlook for our industry is very promising, Indian carriers are faced with stiff headwinds, both from the cost and revenue standpoint, which pose a serious risk to realising the potential," he said at a CII conference on 'Building the future of Indian aviation' here.

On the high costs facing the Indian airline industry, Goyal said the factors included a depreciating rupee against the dollar, escalating jet fuel prices, high taxes and rising infrastructure costs.

While aviation infrastructure had improved considerably, "these improvements have come at a very steep price for both airlines and consumers in the form of significantly higher fees and charges," he said.

On the other hand, the Jet chairman said domestic air fares in India were 'far cheaper than fares in other large aviation markets for sectors of similar distances'.

Giving an example of a domestic sector with a distance of over 2,000 kms, he said compared to India, the air fares in China were 87 per cent higher, in the US 119 per cent higher, in Canada 162 per cent higher and in Australia 182 per cent.

He said thus Indian carriers operate in an environment where the operating costs are much higher than other large aviation markets, while the fares are lower.

"The combined effect of these has been sustained losses for the Indian carriers." If these additional costs were passed on to the passengers, it would "only dampen or stifle demand, as the airlines themselves cannot absorb any of these costs due to their fragile financial conditions," he said.

Goyal made a strong plea for 'supportive action' by the government on these issues, saying such measures would give a fillip to the competitiveness of Indian carriers and make them financially stable and viable.

Observing that India would become the third largest aviation market by 2020, he said while passenger traffic had grown to the current level of 60 million domestic and 40 million international passengers per year, passenger handling capacity of airports have risen from 66 million to 235 million.

The number of aircraft went up from 100 to 413 and air cargo to 2.3 million tonnes in the last 10 years, he said.

Stressing the need for collective action by all stakeholders and the government, Goyal said the government had taken several measures like focussing on infrastructure, opening more international routes for private airlines and made efforts to reduce taxes on jet fuel.

He said the government and all stakeholders should work collectively 'to nurse this vital industry back to robust health'.