Indian airlines need to raise fares in the next six to eight weeks to cut losses as fuel prices climb and the depreciation of the rupee increases costs, according to Dinesh Keskar, president of Boeing Co’s local unit.
“There’s a gap between break-even fares and actual fares the airlines are charging,” Keskar said in an interview yesterday in Mumbai. “Airlines need to reduce costs and increase fares.”
Jet Airways (India) Ltd, the nation’s biggest carrier, posted a bigger-than-expected loss in the second quarter, while SpiceJet Ltd, India’s only listed discount carrier, reported a loss of 2.4 billion rupees (US$48 million) in the same period, as higher fuel prices eroded gains from carrying more passengers.
“Airlines are unable to pass through costs including fuel price increases and airport charges due to competitive dynamics and any increase in fares will surely impact growth,” said Kapil Kaul, the New Delhi-based CEO for South Asia at the Centre for Asia Pacific Aviation, an industry consultant. “A cost-plus pricing strategy seems to be the only way out.”
Competition among airlines in the South Asian nation is prompting carriers to offer cheap prices and buy aircraft. Billionaire Vijay Mallya’s Kingfisher Airlines Ltd, which has cut flights and asked banks to raise lending limits, might report a loss for the 16th straight quarter today, according to Rashesh Shah, an analyst with ICICIdirect.com. The firm added new planes to compete against rivals, including Air India Ltd.
Air India, unprofitable for four years, is struggling with debt built up from ordering 111 planes, including Boeing’s 787 Dreamliner.
The US Export-Import Bank has approved financing for the Dreamliners, Keskar said. Air India has not deferred or canceled the orders, he said.
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