Costly oil, weak rupee to hit airline profits

New Delhi,July 14, 2018:  Profits at listed Indian carriers could nosedive in the three months to June due to rising fuel costs, a falling rupee and intensifying competition — factors that would cancel out the impact of 18 per cent on-year traffic growth.

SpiceJet, InterGlobe Aviation and Jet Airways could, cumulatively, report a 70-75 per cent on-year drop in net profit even though revenue may climb about 15-20 per cent , roughly in kilter with the pace of passenger growth for the industry according to aviationindia.net.

By the end of the June 2018 quarter, Brent crude price soared 13.5 per cent to $78 per barrel and the dollar strengthened 5.3 per cent with respect to the rupee at Rs 68.47. These two variables impact about 40 per cent of a transporter’s costs. Furthermore, stiff competition has prompted companies to lower fares to stay relevant, and the inability to raise fares in lockstep with costs would depress profits.

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